Rachel Reeves speech LIVE: Chancellor accused of 'waffle bomb' as she rolls ground for Budget tax rises

Rachel Reeves has set the groundwork for tax rises in an unusual pre-Budget speech at Downing Street on Tuesday morning.

She reiterated that she will make “the choices necessary to deliver strong foundations for the economy,” including protecting the NHS, reducing national debt, and tackling the cost of living.

The comments come ahead of the Autumn Budget later this month, which is widely expected to include tax rises, despite Labour’s manifesto pledge not to increase income tax, National Insurance, or VAT.

In a speech from Downing Street on Tuesday, the Chancellor said: "I will do what is necessary to protect families from high inflation and interest rates, to protect our public services from a return to austerity and to ensure that the economy that we hand down to future generations is secure with debt under control.”

But she has laid the foundation for tax increases, saying if we are to “build the future of Britain together”, “we will all have to contribute to that effort.”

Economists at the Institute for Fiscal Studies have predicted she will need to find £22 billion to restore the £10 billion of headroom she previously left herself against her self-imposed debt targets.

A bigger-than-expected downgrade to productivity could see that figure increase even further.

Follow the latest updates below...

Reeves speech a 'waffle bomb' says Badenoch

10:45 , Megan Howe

Kemi Badenoch has responded to the Chancellor’s pre-Budget speech, saying it was “one long waffle bomb”.

She accused the Labour Government of having given up on trying to "live within its means", saying that to do so "is not austerity, it is respect for taxpayers".

The Tory leader said: "They talk about working people while making life harder and harder for people who actually work, and worst of all, they pretend that what they're doing is all necessary.

"They pretend that they don't have a choice. The reality is that they have given up trying to change anything.

"They have given up trying to get the Government to live within its means, and they have given up on not raising tax.

"That's what Rachel Reeves was telling us this morning, and a Government that refuses to live within its means, while telling everyone else to tighten their belts isn't being fair, that Government is being hypocritical.

"Getting the Government to live within its means is not austerity, it is respect. It is respect for taxpayers".

Kemi Badenoch has responded to the Chancellor’s pre-Budget speech, saying it was ‘one long waffle bomb’ (PA Wire)

What are the opposition saying?

09:53 , Megan Howe

Politicians are reacting to Rachel Reeves’ speech this morning.

Stride said the speech confirmed the businesses and households that tax rises are coming and that if Reeves “breaks her promise and hikes taxes again, then she must go”.

Daisy Cooper, treasury spokesperson for the Liberal Democrats said the speech was “pointless”.

She said: “ "This Budget will be a bitter pill to swallow," adding that "the government seems to have run out of excuses"

Reeves will have to find millions to plug spending U-turns, economists warn

09:36 , Megan Howe

Economists have estimated that Ms Reeves will have to find billions to plug a black hole caused by U-turns on welfare spending cuts and increased debt interest costs.

The Chancellor also wants to give herself a bigger buffer than the almost £10 billion she previously had against her rule of balancing day-to-day spending against tax receipts in 2029-30.

That has led to the expectation she will be forced to increase one of the big revenue-raising taxes which was previously ruled out in the manifesto.

Ms Reeves repeatedly declined to confirm she will stick to the manifesto commitment, telling reporters: "We've got to do the right things. The problem of the last 14 years is that political expediency always came above the national interest, and that is why we are in the mess that we are in today."

She said she had been appointed Chancellor "not to always do what is popular, but to do what is right".

That would mean a focus on "cutting NHS waiting lists, cutting the national debt and cutting the cost of living".

If Ms Reeves does rip up the manifesto and increase the basic rate of income tax, she would be the first Chancellor to do so for 50 years.

Chancellor Rachel Reeves said ‘each of us must do our bit’ (PA Wire)

OBR expected to downgrade its productivity forecasts

09:30 , Megan Howe

The Office for Budget Responsibility (OBR) is expected to heavily downgrade its previous forecasts for productivity, adding to the Chancellor's headaches.

She said that "it is already clear that the productivity performance that we inherited from the last government is weaker than previously thought" which "has consequences for the public finances" in terms of lower tax revenue.

The OBR's review of productivity is likely to be "the most impactful thing in the Budget, in terms of the change in the fiscal and economic outlook", she said.

What are experts saying about Reeves' pre-Budget speech?

09:29 , Megan Howe

The government could be “laying the ground to make a big change” says Sarah Coles, head of personal finance at Hargreaves Lansdown, with “income tax” being “front and centre” of this difficult decision.

HL research shows that a rise in income tax is the biggest concern for people across the UK ahead of the Budget.

"The cost of a rise in basic rate income tax would vary with earnings, but a 1p rise would add £224 to the tax bill of someone earning £35,000 each year,” Ms Coles said.

"If they earned £55,000, it would cost an extra £377 - and it would be the same for someone earning £75,000.

"A rise that only affected higher and additional rate taxpayers might be easier politically, as by falling only on higher earners the government could make the case that the average earner wouldn't be affected.

"If you earned £35,000 a year, an extra 1p on higher rate tax wouldn't cost you anything.

“The more you earn, the harder this hits, so if you earned £55,000, it would cost you an extra £47 a year and if you earned £75,000, it would cost you an extra £247.

"Raising both would mean someone making £35,000 a year would pay £224 more.

“Meanwhile, if you earned £55,000, it would cost you an extra £424 and if you earned £75,000, it would cost you £624 more.”

Reeves partly blames Trump for UK economic woes

09:08 , Megan Howe

Reeves partly blamed Donald Trump for the UK’s fiscal woes, stressing the economy had been hit by the US president’s tariffs.

The Chancellor said US tariffs, the need for increased defence spending and the rising cost of living were some of the challenges the government now faces.

Reeves hints at tax increases in her speech

08:48 , Megan Howe

In a hint that tax increases are likely at the Budget, Rachel Reeves made clear that "we will all have to contribute" to repairing the public finances.

The Chancellor said: "I will do what is necessary to protect families from high inflation and interest rates, to protect our public services from a return to austerity and to ensure that the economy that we hand down to future generations is secure with debt under control.

"If we are to build the future of Britain together, we will all have to contribute to that effort.

"Each of us must do our bit for the security of our country and the brightness of its future.”

Chancellor continues to avoid questions on tax hikes

08:45 , Megan Howe

The Chancellor is now taking questions from reporters.

A key theme has been potential tax hikes, particularly on income tax, which have been the focus of recent speculation.

Reeves, however, has continued to sidestep these questions, saying that today’s speech provides the context for next month’s budget, which will outline any tax increases.

Reeves says the Budget will be focused on 'getting inflation falling'

08:43 , Megan Howe

Chancellor Rachel Reeves said the Budget would be focused on "getting inflation falling" and "creating the conditions for interest rate cuts".

The Chancellor said she will do what is “right” rather than what would make her “popular”, leaving open the possibility of tax rises.

Reeves said that previous government’s had not adequately faced the economic challenges as she said “too often political convenience has been prioritised over economic imperative.”

"The decision to pursue a policy of austerity after the financial crisis dealt a hammer blow to our economy, gutting our public services and severing the flows of investment that would have put our country on a path to recovery,” she said.

"The years that followed were characterised by instability and indecision, with crucial capital investment continually sacrificed, and hard decisions put off again and again.

"And then a rushed and ill-conceived Brexit that brought further disruption as businesses trying to trade were faced with extra costs and extra paperwork."

National debt stands at around £2.6 trillion says Reeves

08:34 , Megan Howe

Reeves said politicians who continue to push for “easy answers” are “irresponsible,” insisting she will not revert to the old habits of “austerity, reckless borrowing and made up numbers.”

She added that “these are the problems, not the solutions.”

The Chancellor says the UK’s national debt now stands at £2.6trillion or 94% of the national income.

"No accounting trick can change the basic fact" that there are limits to how much the government can borrow, she adds.

Reeves hits out at Reform UK and Conservatives

08:31 , Megan Howe

Rachel Reeves has taken aim at opposition parties during her pre-Budget speech this morning.

She cited the case of Kent County Council, where Reform UK plans to raise council tax despite pledging to cut costs.

Reeves also criticised the Conservative government’s record on spending, asking: “What were they doing for 14 years?”

Reeves to make 'necessary choices' for the economy

08:25 , Megan Howe

Rachel Reeves has reiterated she will make "the choices necessary to deliver strong foundations for the economy".

Britain’s priorities are protecting the NHS, bringing down national debt and the cost of living, she says.

Chancellor blames 'Tory mismanagement' as she sets out Budget choices

08:20 , Megan Howe

Chancellor Reeves says the UK is a “country with considerable economic strengths”, while going on to criticise the previous Conservative government and accusing them of having overseen years of “economic mismanagement”.

Reeves says she is dealing with a £22billion black hole.

'The world has thrown even more challenges our way', Reeves says

08:17 , Megan Howe

Since last year’s Budget, Rachel Reeves says “the world has thrown even more challenges our way” as she outlines the difficult choices she is preparing to make.

Opening her speech this morning, Chancellor Reeves set out the reasons behind the need for change — citing tariffs, the rising cost of living, stubbornly high inflation, and increased government borrowing.

“We also face pressure to increase our defence spending and to protect ourselves from hostile actors,” she says.

Chancellor Rachel Reeves delivers a speech ahead of the Budget (Justin Tallis/PA Wire)

The Budget will 'prioritise' British people, Chancellor claims

08:11 , Megan Howe

Writing on social media this morning, the Chancellor has said the budget next month will focus on the priorities of British people.

“The Budget this month will focus squarely on the priorities of the British people: cutting waiting lists, cutting the national debt and cutting the cost of living,” she said.

“Today I will set out the choices our country faces and the values that will guide my decisions.”

But will this include raising income tax, VAT or NI? She will be speaking in the House of Commons any second now.

The Budget this month will focus squarely on the priorities of the British people: cutting waiting lists, cutting the national debt and cutting the cost of living.

Today I will set out the choices our country faces and the values that will guide my decisions.

— Rachel Reeves (@RachelReevesMP) November 4, 2025

Reeves braces Britain for hefty Budget tax rises as she warns of need to understand 'circumstances we face'

08:07 , Megan Howe

After the controversy of her first Budget last year, when she significantly raised National Insurance contributions for employers and imposed tax rises of £40 billion partly to better fund the NHS and other public services, the Chancellor insisted her next Budget would not be on a similar scale in terms of higher levies.

However, she appeared to be rolling the pitch for some sizeable tax rises later this month after the fiscal watchdog, the Office for Budget Responsibility, blew an estimated £20 billion hole in her blueprint for Britain by cutting the nation’s productivity forecasts.

Reeves braces Britain for Budget tax rises to deal with 'circumstances we face'

What did Labour's election manifesto say?

08:03 , Megan Howe

The focus of the Chancellor’s speech today centres around whether or not she will raise income tax in next month’s budget.

If it is raised, Reeves would be breaking one of Labour's manifesto pledges.

This is what the manifesto pledge said: "We will ensure taxes on working people are kept as low as possible. Labour will not increase taxes on working people, which is why we will not increase national insurance, the basic, higher, or additional rates of income tax, or VAT"

Reeves refuses to rule out income tax hike

08:01 , Megan Howe

Chancellor Reeves has refused to rule out raising income tax in next month’s Budget. If she does, she would be breaking a key Labour election pledge.

Reeves said she would "continue to support working people by keeping their taxes as low as possible".

But the Chancellor’s refusal to shut down rumours of a rise does not necessarily mean it is inevitable, as chancellors rarely confirm or deny tax changes before the budget.

Last week, however, the Telegraph reported that she was considering a 2p rise to the basic rate.

Tax rises 'inevitable' think tank says

07:59 , Megan Howe

The Resolution Foundation has warned that tax rises are “inevitable” as Rachel Reeves looks to balance the books.

The think tank says avoiding changes to VAT, National Insurance (NI), or income tax would “do more harm than good” and increasing income tax would be the “best option” for raising cash.

The Foundation says raising VAT would fuel the “UK’s high inflation problem”, and the Chancellor should turn this time to Income tax.

Offsetting a 2p rise in Income Tax with a 2p cut in employee National Insurance would raise £6 billion overall whilst protecting workers from tax rises, the think tank says.

The think tank also says extending the freeze in personal tax thresholds for two more years beyond April 2028 would raise £7.5billion and would be “reasonable”, given the low rates of tax paid by average employees relative to other countries.

Chancellor Rachel Reeves to deliver a pre-Budget speech

07:45 , Megan Howe

Chancellor Rachel Reeves is set to deliver a speech from Downing Street this morning, starting at around 8.10am, ahead of the Budget later this month.

She will pledge it will be “fair”, as she lays out some of her priorities including cutting waiting lists, the cost of living and the national debt.

But with public finances in crisis, the Chancellor has prepared the nation for higher levies and possible spending cuts.

In a speech in Downing Street, she is set to say: “You will all have heard a lot of speculation about the choices I will make.

“I understand that these are important choices that will shape our economy for years to come.

“But it is important that people understand the circumstances we are facing, the principles guiding my choices, and why I believe they will be the right choices for the country.”

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Chancellor of the Exchequer Rachel Reeves (PA Archive)