“I Won’t Duck Those Challenges” Rachel Reeves Hints at Tax Rises Ahead of Budget

Rachel Reeves has said she’s looking at both tax rises and spending cuts as she prepares her first budget, after being briefed on just how deep the country’s financial hole has become.

Speaking to Sky News in her first interview since seeing the early numbers from the Office for Budget Responsibility, the chancellor confirmed what many had suspected. When asked how she’d handle the challenge ahead of her 26 November statement, she said, “Of course, we’re looking at tax and spending as well.”

This is the first time Reeves has openly acknowledged that higher taxes could be part of the plan. Just a fortnight ago, she avoided the subject altogether, insisting instead on her focus on growth. Ministers had also suggested spending cuts wouldn’t be on the table.

When pressed on whether Britain was trapped in a “doom loop” of annual tax rises to plug recurring shortfalls, Reeves didn’t fully deny it. “Nobody wants that cycle to end more than I do,” she said, adding that her goal is to grow the economy rather than rely on tax hikes.

When asked again, she pushed back slightly, saying she “would not use those words,” pointing out that the UK had the fastest-growing economy in the G7 in the first half of the year.

The OBR’s latest figures suggest Reeves needs to find around £30 billion to balance the books. The challenge has been made tougher by the government’s recent U-turns on winter fuel and welfare changes, and a downgrade in productivity forecasts that mean the country is expected to earn less in the future.

The IMF has offered a small lift, nudging up its 2024 growth forecast for the UK to 1.3%. But it also trimmed its 2025 outlook by the same amount, keeping it at 1.3%. While that would still make Britain the second-fastest growing G7 economy after the US, it’s 0.4 percentage points worse than last autumn’s projections.

Reeves, who is currently in Washington for the annual IMF and World Bank meetings, told Sky News she was committed to keeping the country’s finances steady despite global headwinds. “I was really clear during the general election campaign that I would always make sure the numbers add up,” she said. “Challenges are being thrown our way – from geopolitical uncertainty to conflicts around the world, to increased tariffs and trade barriers.”

She was firm that relaxing the fiscal rules was not an option, meaning tax rises are now almost unavoidable. “I won’t duck those challenges,” she said. “Of course, we’re looking at tax and spending as well, but the numbers will always add up with me as chancellor. We saw just three years ago what happens when a government loses control of the public finances – inflation and interest rates went through the roof.”

Reeves didn’t shy away from naming the culprits behind the UK’s sluggish growth. “Austerity, Brexit, and the ongoing impact of Liz Truss’s mini-budget, all of those things have weighed heavily on the UK economy,” she said.

She acknowledged that Brexit in particular has left lasting scars. “Already, people thought that the UK economy would be 4% smaller because of Brexit,” she said. “Now, of course, we are undoing some of that damage by the deal we did with the EU earlier this year on food, farming, energy and trade. But there is no doubting that the impact of Brexit is severe and long-lasting.”