LONDON – U.K. Treasury chief Rachel Reeves on Tuesday signaled she will raise taxes in her budget this month, arguing that the economy is sicker than the government knew when it took office last year.
Reeves gave a highly unusual speech, three weeks before the Nov. 26 budget, to brace voters and financial markets for the likelihood she will break an election pledge not to increase income taxes or sales tax.
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“If we are to build the future of Britain together, we will all have to contribute to that effort,” she said, in a hint at broad tax increases. “Each of us must do our bit for the security of our country and the brightness of its future.”
Reeves cited interest payments on the U.K.’s 2.6 trillion pound ($3.4 trillion) national debt and a lower-than-expected productivity assessment from the government’s economic forecaster as factors behind her decisions.
“The productivity performance that we inherited from the last government is weaker than we first thought,” Reeves said. “We’re putting in more, we’re getting out less.”
On top of that, “the world has thrown even more challenges our way,” including U.S. President Donald Trump’s tariffs, volatile supply chains and a rise in the cost of government borrowing, she said.
While many of the economic challenges are global, Reeves said Britain is especially exposed because of high debt left by “years of economic mismanagement” under the Conservative Party that was in power for 14 years until 2024.
The British economy, the sixth-largest in the world, has underperformed its long-run average since the global financial crisis of 2008-2009, and the center-left Labour Party government elected in July 2024 has struggled to deliver the economic growth it promised.
Inflation remains stubbornly high and growth sluggish, frustrating efforts to repair tattered public services and ease the cost of living.
Critics say Reeves has made things worse by being overly downbeat and increasing taxes on businesses in last year’s budget.
Conservative leader Kemi Badenoch dismissed Reeves' speech as “a laundry list of excuses” that would leave business leaders and investors confused.
Reeves provided no details of what taxes she plans to raise. She said the budget would deliver “growth and fairness” and would focus on strengthening the overstretched public health service, reducing the national debt and getting inflation down to improve the cost of living.
Dan Coatsworth, head of markets at investment firm AJ Bell, said Reeves was under pressure to make “bolder decisions” on tax.
“Many people believe it is better to sort the situation out once and for all, rather than keep tinkering at the edges," he said. “This feels like Reeves’s last chance to fix the house, otherwise her days could be numbered.”
As well as preparing for a budget with huge implications for the country and government, Reeves has faced criticism after a newspaper reported last week that she had broken the law by renting out her London house without a license from the local authority.
She apologized for what she called an inadvertent mistake, and Prime Minister Keir Starmer said he would not take action.