Reeves acknowledges she is looking at tax and spending ahead of Budget

Chancellor Rachel Reeves has acknowledged she is “looking at tax and spending”, ahead of her autumn Budget next month.

Reeves said she would “always make sure the numbers add up”, in an interview with Sky news against a backdrop of slow economic growth and mounting government debt.

The chancellor has previously hinted at tax rises, and economists have said they expect taxes to go up in the Budget if the chancellor wants to meet her self-imposed rules on borrowing. With this comment, the chancellor has also signalled that spending cuts could be a consideration.

The Budget in November is the moment when the chancellor outlines the UK government’s plans for the economy.

Reeves has faced repeated questions about the prospect of tax rises in her Budget.

Some analysts have estimated that the chancellor will have to increase taxes or cut spending to fill a hole in the public finances, estimated to be £20bn-£30bn.

Reeves received the Office for Budget Responsibility’s (OBR) assessment of the economy on 3 October.

Now the chancellor’s brief comments make more explicit what has been assumed across Westminster for many months – that tax rises in the Budget are inevitable.

It is likely that in the weeks before the Budget, as Reeves learns more about how much money she needs to raise and makes decisions about how to do it, she and other ministers will become more explicit still about the direction of travel.

Speaking to the BBC, Chief Secretary to the Treasury James Murray said he wouldn’t speculate on what might be in the Budget.

“The chancellor makes all her decisions on Budget day on 26 November and sets out her package there,” Murray said.

“Yes, a budget focuses on tax and spend and we’ll set out how we’re keeping a tight grip on public spending.”

The additional suggestion of spending cuts by Reeves is intriguing – many Labour MPs believe that spending cuts in most areas would be politically unviable after the failed attempts at welfare cuts earlier this year, although the government could promise to cut spending in four or five years.

Reeves told Sky News the effects of Brexit, austerity policies and former Prime Minister Liz Truss’s mini-budget had damaged the UK economy.

Sky News reported that when asked how she would deal with the country’s economic challenges, Reeves said: “Now, of course, we are undoing some of that damage by the deal that we did with the EU earlier this year on food and farming, goods moving between us and the continent, on energy and electricity trading, on an ambitious youth mobility scheme, but there is no doubting that the impact of Brexit is severe and long-lasting.”

In her speech to Labour conference last month, Reeves said the government was facing difficult choices and promised she would not take risks with the public finances.

The chancellor pledged to keep “taxes, inflation and interest rates as low as possible”.

Labour promised in its 2024 manifesto ahead of last year’s general election not to increase taxes on “working people”, saying the party would not “increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT”.

On Monday, the International Monetary Fund (IMF) said the UK was set to be the second-fastest-growing of the world’s most advanced economies this year.

But the IMF also predicted the UK will face the highest rate of inflation among G7 nations both this year and next, driven by rising energy and utility bills.

Shadow chancellor Sir Mel Stride said needed to get a grip on public spending, rather than raise taxes again.

He said: “Be in no doubt, this tax doom loop is down to the Chancellor’s economic mismanagement.

“Under Rachel Reeves we have seen inflation double, debt balloon, borrowing costs at a 27-year high, and taxes up – with more pain on the way in the autumn.”