In a move that has set Westminster abuzz, Chancellor Rachel Reeves has signaled that her upcoming Budget could break some of Labour’s flagship tax promises.
Speaking outside Downing Street, Reeves delivered a sobering message — she will make the “necessary choices” to repair Britain’s struggling economy, even if that means painful decisions for taxpayers.
A Cautious Prelude to a Defining Budget
It’s rare for a Chancellor to give a public speech just weeks before a Budget, but Reeves appeared determined to prepare the nation for what’s coming.
She spoke of a country grappling with tough global conditions, rising borrowing costs, and the lingering fallout from years of Brexit disruption and Tory austerity.
Reeves painted a stark picture of the economy, saying it “is not working as it should,” and warned that hard realities, not political wishful thinking, will shape her decisions.
The Financial Black Hole and the Fear of Another Tax Shock
Behind the scenes, Treasury officials estimate there’s a massive shortfall of between £20 billion and £50 billion in the public finances.
That’s sparked fears of another “tax raid” just a year after Reeves delivered what was already the biggest tax-raising Budget in UK history — one that brought in £41 billion.
Back then, she told the business community she wouldn’t come back for “more borrowing or more taxes.”
But the situation now looks far more severe. “We must deal with the world as it is,” she said pointedly, hinting that Britain may have to brace for further financial strain.
Keir Starmer Prepares MPs for ‘Hard and Serious Decisions’
Prime Minister Keir Starmer reportedly gathered Labour MPs on Monday night, warning them that the Budget will involve “hard and serious decisions.” Still, he promised the measures would be “fair.”
Reeves’ team has kept a low profile since it was revealed last week that she had broken the law by renting out her family home without the necessary licence — a controversy that has shadowed her in recent days.
Despite this, she’s staying focused on her fiscal mission: ruling out spending cuts but insisting that new “investment” is crucial to fix public services and drive growth.
Could Labour’s Tax Promises Be on the Chopping Block?
Downing Street has so far declined to confirm whether Labour still stands by its manifesto commitment not to raise income tax, VAT, or National Insurance.
However, insiders say Reeves is considering a proposal from the Left-leaning Resolution Foundation to raise income tax by 2p, the first increase in the basic rate in half a century.
There’s talk that this might be partially offset by a 2p cut in National Insurance, but that trade-off would still generate roughly £6 billion annually — hitting pensioners and middle-income earners alike.
Who Counts as ‘Working People’? The New Divide
Treasury insiders claim Reeves’ team is defining “working people” as those earning under £45,000 a year, meaning the top third of earners — including teachers, HGV drivers, and even restaurant chefs — could soon find themselves labelled as “wealthy.”
Officials are reportedly scouring ways to draw more tax from higher earners while protecting the lower two-thirds.
The move has already drawn criticism for unfairly punishing professionals who don’t see themselves as affluent.
Property Owners Could Face Sharp Council Tax Hikes
Another major target appears to be property owners.
Reeves is said to be weighing a dramatic increase in council tax for homes in the top valuation bands — a change that could double payments for over a million families.
For example, Band G households in England could see their annual bills jump from £3,800 to £7,600, while Band H properties might soar from £4,560 to £9,120.
Such changes would hit London and the South East the hardest, where property values are highest.
Critics warn the move could devastate pensioners on fixed incomes and families who’ve stretched themselves to afford their homes.
Other Options on the Table
Beyond income and property taxes, the Treasury is also exploring other avenues to raise revenue.
Among them: capital gains, inheritance tax, pension relief cuts, and partnership structure reforms.
Sources say final decisions will likely be made in the coming week, once the Office for Budget Responsibility (OBR) begins incorporating government plans into its economic forecasts.
Economists Warn of the Scale of What’s Coming
The Resolution Foundation, whose members have played key roles in shaping Labour’s fiscal policy, predicts tax rises of around £26 billion are “inevitable.”
Economists warn that even a modest package could have a chilling effect on growth, and some fear the scale might rival last year’s historic tax haul.
If that happens, Reeves would have introduced larger tax increases in just 16 months than Gordon Brown managed over an entire decade.
Conservative Backlash and Political Pressure
Unsurprisingly, Conservatives are sharpening their attacks.
Tory MPs have urged Starmer to sack his Chancellor if she breaks Labour’s tax pledges to the public, accusing the government of betraying voters who expected relief, not more pain.
But Reeves insists she’s acting out of necessity, not ideology.
“There is a clear choice,” she told the nation — “investment and hope, or cuts and division.”
For many Britons, the real question now is how much that hope will cost.