Chancellor Rachel Reeves just slapped us round the face with a reality check: this year’s Budget is going to sting. With a £30bn black hole to fill and “harsh global headwinds” battering the UK economy, she’s hinting that Labour’s manifesto tax promises might not survive contact with reality. Translation? Your wallet should probably brace itself.
At the Labour Party conference, Reeves didn’t sugarcoat it. The fiscal mess left by her Tory predecessors, combined with global economic turbulence, means tougher decisions are coming on 26th November. And when she started calling tax rises “contributions,” well, you know what that means.
What’s Actually on the Table?
Tax Rises Are Coming (Just Don’t Call Them That)
Reeves wouldn’t rule out VAT increases when pressed, despite Labour’s manifesto explicitly promising to keep VAT untouched. When Chief Secretary Darren Jones was asked if those manifesto commitments still stand, his response was telling: “The manifesto stands today, because the decisions haven’t been taken yet.”
That’s politician-speak for “maybe not for long.”
Rachael Griffin from Quilter points out that while Reeves stressed she won’t “break the trust of voters,” she’s left the door wide open for indirect tax changes. Think fiscal drag—where frozen income tax thresholds silently pull more people into higher tax brackets. It’s already happened, and it could get worse.
The wealthy should definitely be worried. Higher taxes on top earners seem almost guaranteed, whether through extended threshold freezes or new levies that target high-income households.
OBR Gets Its Forecasting Powers Clipped
In a surprising move, Reeves announced the Office for Budget Responsibility will now publish just one forecast per year instead of two. She’s calling it “alignment with IMF recommendations,” but critics see it as limiting independent scrutiny of government finances.
“Two full forecasts a year make it harder to have that one fiscal event,” Reeves told Times Radio. The shift technically tweaks her supposedly “non-negotiable” fiscal rules—a contradiction that hasn’t gone unnoticed.
New Policies: Youth Jobs and EU Mobility
Reeves didn’t just deliver doom and gloom. She announced a youth mobility scheme with the EU to improve opportunities for young Brits, guaranteed paid work placements for young people not in work or education, and a pledge to build libraries in primary schools nationwide.
But Shadow Chancellor Mel Stride wasn’t impressed. He slammed Reeves for introducing a £25bn jobs tax in her first Budget that makes hiring young people more expensive, then trying to fix youth unemployment with taxpayer-funded schemes.
“You don’t get more young people into work by punishing the very businesses that hire them,” Stride said. He’s got a point—businesses are already drowning in new regulatory burdens.
Business Secretary Peter Kyle doubled down on implementing the Employment Rights Bill “in full,” despite calls from business leaders to water it down. UK businesses? They’re not feeling the love.
What Experts Are Saying
Tom Clougherty from the Institute of Economic Affairs didn’t hold back: “Rachel Reeves mentioned breakfast clubs in her major conference speech more than taxes.”
His takeaway? Expect significant tax increases to fund all these spending promises. And when Reeves asked who will stand up for British businesses, Clougherty noted that businesses are probably thinking, “if the answer is this government, we’re in serious trouble.”
The growth plans also lack substance. Despite making economic growth Labour’s number one priority, there’s little concrete policy to back up the positive rhetoric.
The Bottom Line
Rachel Reeves is preparing the UK for a painful Budget. Tax rises are coming—whether through direct increases, frozen thresholds, or new levies on the wealthy. Higher earners should start planning now, businesses should brace for more costs, and anyone expecting Labour to honour every manifesto promise might want to adjust their expectations.
FAQ: Rachel Reeves Budget 2025
Q1: Will Labour break its manifesto promise not to raise taxes?
A: It’s looking increasingly likely. While no final decisions have been made, government ministers are being deliberately vague about whether manifesto commitments still apply. The £30bn fiscal shortfall makes tax rises almost inevitable.
Q2: What is fiscal drag and how will it affect me?
A: Fiscal drag happens when income tax thresholds stay frozen while wages rise with inflation. This silently pushes more people into higher tax brackets without any official “tax rise.” It’s already pulled thousands into paying tax for the first time.
Q3: Why is the OBR only publishing one forecast per year now?
A: Reeves claims it aligns with IMF recommendations and supports having one major fiscal event annually. Critics argue it reduces independent oversight of government spending and makes it easier to hide uncomfortable fiscal realities.
Q4: What’s the £25bn jobs tax that businesses are complaining about?
A: This refers to increased National Insurance contributions for employers announced in Reeves’ first Budget. Combined with the Employment Rights Bill, businesses argue it makes hiring—especially young people—significantly more expensive.
Q5: When is the Budget and what should I expect?
A: The Budget is on 26th November 2025. Expect indirect tax increases through frozen thresholds, potential VAT changes, higher taxes on wealthy individuals, and more regulatory costs for businesses. “Contributions” will be the government’s preferred euphemism.
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Effective Date: 15th July 2025
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