Reeves commentary fails to rule out tax rises

UK Chancellor Rachel Reeves delivered a sober pre-Budget speech this morning, signalling that she is prepared to make “necessary, not popular” decisions to safeguard the British economy. She warned that since her last Budget, the world has thrown “even more challenges our way,” citing sluggish productivity, persistent inflation and elevated global borrowing costs

Reeves did not explicitly restate Labour’s campaign pledge not to raise income tax, VAT, or National Insurance for working people, which could indicate an openness to revisiting those promises if the fiscal outlook worsens. While she stopped short of announcing specific tax measures, Reeves made it clear that everyone “must do their bit” to protect public services and restore stability, laying the groundwork for potential tax rises in the months ahead.

She acknowledged the existence of a fiscal gap estimated at £20–30 billion, driven by weak productivity growth, sticky inflation, and higher global interest rates. Overall, her comments framed a pragmatic approach to rebuilding fiscal resilience while managing public expectations ahead of the next Budget.

The market reaction has been limited, with gilt yields dropping marginally as investors welcome the emphasis on prudence. However, the FTSE 100 has extended the losses into the European morning as Reeves’ comments highlight a difficult fiscal situation in the UK, which could have a negative effect consumers and business in tax increases are announced on November 26^th.

FTSE 100 5-minute chart

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