Chancellor Rachel Reeves used a Downing Street statement on 4 November to prepare the country for revenue-raising measures in the 26 November Budget. She declined to recommit to Labour’s 2024 pledge not to raise Income Tax, VAT or National Insurance, saying “each of us must do our bit” and that “we will all have to contribute.” HM Treasury published a full transcript of the speech; Reuters confirmed the Budget date.
Reeves described a “Budget for growth with fairness,” arguing that choices now are needed to protect families from high inflation and interest rates, avoid a return to austerity, and keep debt under control. She said she would do what is necessary rather than what is popular, and stressed an “iron‑clad” commitment to her fiscal framework. The speech also flagged an accompanying Office for Budget Responsibility (OBR) supply‑side review and weaker productivity as constraints on the public finances.
Opposition leaders responded immediately. Conservative leader Kemi Badenoch called the event “one long waffle bomb” and argued ministers should stimulate activity by scrapping Stamp Duty on main residences, reflecting a pledge made at her party conference in October. Liberal Democrat Treasury spokesperson Daisy Cooper said the Budget would be “a bitter pill to swallow,” criticising the lack of specifics.
The Treasury’s fiscal framework remains central to the choices ahead. The stability rule requires the current budget to be in balance by 2029/30 (and, from 2026/27, in the third forecast year on a rolling basis). The investment rule requires public sector net financial liabilities (“net financial debt”) to be falling by the end of the forecast period, with the same third‑year rolling application thereafter. Reeves reiterated that adherence to these rules is non‑negotiable.
The OBR is expected to downgrade its view of trend productivity alongside the Budget. The Institute for Fiscal Studies’ rule‑of‑thumb is that each 0.1 percentage‑point downgrade to annual productivity growth adds around £7bn to borrowing in 2029/30; recent reporting points to a potential 0.3 point cut, implying roughly £20–£21bn of extra borrowing pressure. Reeves also cited ongoing tariff risks, supply‑chain volatility and higher global borrowing costs as headwinds.
Headroom is tight. In March, the OBR judged the government to have around £9.9bn of space against the stability rule in 2029/30; by mid‑March the Resolution Foundation assessed that the rules were about £4.4bn in the red, illustrating how quickly buffers can erode when forecasts shift. Markets reacted modestly to today’s positioning: sterling dipped toward $1.31, a seven‑month low, while gilt yields edged lower-moves consistent with expectations of fiscal tightening.
Options now being modelled focus on broad‑based revenue. The Resolution Foundation’s pre‑Budget paper suggests that a 2p rise across the three main Income Tax rates, offset by a 2p cut to employee National Insurance, would raise about £6bn while shielding most workers; extending the freeze in personal tax thresholds by two years beyond April 2028 could raise roughly £7.5bn. The same paper argues for increasing fiscal headroom to £15–£20bn to reassure markets.
Design choices carry different distributional and operational effects. An increase in Income Tax would apply to pensioners as well as workers, whereas most individuals stop paying employee National Insurance after reaching State Pension age, though employers continue to pay secondary contributions. Extending frozen thresholds would continue fiscal drag, pulling more earners into higher bands as wages rise.
Further proposals under discussion in the research community include reforms to capital gains and dividend taxation and the application of employer National Insurance to pension contributions, which the Resolution Foundation says could together raise significant sums while improving coherence in the tax base. Ministers have not endorsed these options, but officials want a package that raises revenue without undermining growth.
What happens next is clear in timetable terms. The OBR’s forecasts and supply‑side review will be published alongside the Budget on Wednesday 26 November. The core test for any package is whether it delivers a durable path back to a current‑budget surplus and falling net financial debt, while avoiding renewed cuts to frontline services.