"Tax hikes and spending cuts" - Britain warns of new measures to face economic challenges
Britain's finance minister, Rachel Reeves, has admitted that tax increases and spending cuts are being considered in the next budget, suggesting the government may be willing to sacrifice a previous promise not to raise taxes on workers.
“Of course, we are also looking at taxes and spending,” the finance minister said, when asked how she would address the country’s economic challenges in the Autumn Budget on November 26.
"Of course, challenges are coming our way, but I will not shy away from them," she said, indicating that she will maintain her "ironclad" fiscal rules, where the main thing is that daily expenses are financed by tax revenues, and not by borrowing.
To plug a fiscal gap that could reach as much as £50bn, Reeves faces some tough options: break his own rules and rattle markets, or raise taxes and cut spending, angering both voters and Labour lawmakers.
The Labour Party had promised in the 2024 election campaign that it would not raise taxes on workers, specifically National Insurance contributions, the income tax threshold, or VAT. Reeves had also said it would not burden businesses again, as they bore the brunt of the £40 billion tax increases in last year's Autumn Budget.
Efforts to cut government spending on social welfare have been met with resistance from Labour lawmakers this year. There are concerns that tax increases could hurt already weak economic growth. The International Monetary Fund released its latest economic forecast, which shows the UK economy growing by 1.3% in 2025, an improvement on its previous forecast, and again by 1.3% in 2026.
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