Chancellor Rachel Reeves has cautioned that her decisions will be more challenging at this year’s Budget, amid speculation that she may need to reconsider Labour’s tax commitments to address a £30bn deficit.
Speaking at the Labour Party conference, Reeves highlighted “harsh global headwinds” and the impact of previous Conservative policies as factors necessitating more contentious decisions in the upcoming Budget. She suggested that tax increases would be framed as “contributions” to ensure economic growth is distributed across the UK.
Reeves stated, “In the months ahead, we will face further tests, with the choices to come made all the harder by harsh global headwinds, and the long-term damage done to our country, which is becoming ever clearer.”
She addressed her critics, including Manchester Mayor Andy Burnham and opposition parties, who have challenged her fiscal policies. Reeves defended her stance, asserting, “When I said we must not and would not take risks with Britain’s economic stability, that argument was not just for an election. Even now, with the global uncertainty we have seen ripple through financial markets, there are still critics out there who would too readily forget the consequences of reckless economic choices.”
Earlier, Reeves announced a change to the Office for Budget Responsibility’s (OBR) forecast schedule, reducing it to one annual forecast instead of two, aligning with recommendations from the International Monetary Fund. She explained to Times Radio, “Two full forecasts a year make it harder to have that one fiscal event. There are different ways you could do it, you could do a shorter term forecast, you could do a forecast that just looks at the changes in the economy over that period of time.”
Reeves also did not rule out VAT increases, a contentious issue given Labour’s manifesto pledge not to alter the tax.
In her address, Reeves unveiled new policies, including a youth mobility scheme with the European Union, guaranteed paid work placements for young people, and a commitment to build libraries in primary schools.
Shadow Chancellor Mel Stride criticised Reeves, claiming her policies hinder youth employment. He argued, “Rachel Reeves says she wants to abolish youth unemployment – yet in her very first Budget, she introduced a £25bn jobs tax that made it more expensive for businesses to hire, especially young people.”
Stride continued, “That’s the contradiction at the heart of Labour’s plan: they talk about opportunity, but their policies kill jobs. Reeves is trying to fix a problem she created – while pointing the finger of blame, as she so often does, at everyone else. You don’t get more young people into work by punishing the very businesses that hire them. The answer isn’t more taxpayer-funded schemes – it’s growth, lower taxes, and a pro-jobs economy.”
Before Reeves’ speech, Business Secretary Peter Kyle confirmed his commitment to fully implement the Employment Rights Bill, despite calls for modifications from business leaders. He acknowledged former Deputy Prime Minister Angela Rayner’s role in advancing the Bill, expressing Labour’s gratitude for her efforts.
