(Bloomberg) — Rachel Reeves’ next budget may be two months away, but its contours are becoming clearer after the UK Chancellor of the Exchequer used her party’s annual conference to lay the ground for raising taxes and lifting an unpopular cap on child benefits.
Higher levies on gambling companies, a potential freeze on income tax thresholds and changes to welfare spending were among the moves hinted at by Reeves and other senior ministers this week during the Labour Party’s four-day convention in Liverpool.
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While Prime Minister Keir Starmer used a BBC radio interview at the close of the conference to say nothing has yet been decided, the piecemeal disclosures by ministers in speeches, interviews and appearances at fringe panel events form the clearest picture yet of the government’s thinking around how it will deal with what’s shaping up to be a fraught budget on Nov. 26.
The problem for Reeves is she needs to find an estimated £35 billion ($47 billion) to fill a hole in the public finances and restore the slim margin for error she enjoyed in March. The shortfall has swelled amid rising borrowing costs and major policy U-turns.
But the biggest blow could come on Friday, when the Office for Budget Responsibility delivers its first fiscal forecasts to the Treasury, which are expected to include a meaningful downgrade to its productivity estimates. Those measure how much the average British worker produces, the determining factor in economic success.
“We’re at the stage where we haven’t even got the first set of numbers from the OBR yet,” Starmer told the BBC, referring to the series of economic forecasts the government’s fiscal watchdog furnishes in advance of a budget. “So I can tell you, no actual decisions have been taken.”
The budget is seen as a make-or-break moment for Starmer, who has spent much of the week trying to shore up his Labour base amid frustration with the party’s decline in the polls against the populist Reform UK. Starmer reshuffled his advisory team last month in a bid to get a grip over fiscal policy after some of Reeves’ most high-profile cost-cutting moves were rejected by the party.
The next budget presents a particular communications challenge for Reeves, who said in the aftermath of her inaugural £40 billion tax-raising budget last year that she had “fixed the foundations” of the economy and wouldn’t be coming back for more borrowing or taxes.
