Chancellor Rachel Reeves has all but confirmed she will break key tax promises made in Labour's election manifesto, setting the stage for a contentious Autumn Budget scheduled for November 26, 2025.
In a significant shift, the Chancellor warned that maintaining the pledge not to increase income tax, National Insurance, or VAT would require 'deep cuts' to essential public investment, potentially harming Britain's economic growth.
Defending Difficult Choices
Speaking to BBC Radio 5 Live, Ms Reeves framed her upcoming budget decisions as necessary for long-term stability. 'It would, of course, be possible to stick with the manifesto commitments,' she stated, 'but that would require things like deep cuts in capital spending.'
She directly linked the UK's poor productivity growth to past governments' tendency to cut investment in infrastructure. 'The reason why our productivity and our growth has been so poor these last few years is because governments have always taken the easy option to cut investment – in rail and road projects, in energy projects, in digital infrastructure,' she argued.
A Glimmer of Hope: Scrapping the Two-Child Cap
In a move that has pleased poverty campaigners, the Chancellor strongly hinted she is open to abolishing the controversial two-child benefit cap. This policy, introduced by the Conservative government in 2017, prevents parents from claiming child tax credit or Universal Credit for more than two children.
Ms Reeves expressed a clear moral stance on the issue, stating, 'I don't think that it's right that a child is penalised because they are in a bigger family through no fault of their own.' She emphasised the economic cost of unchecked child poverty and pledged action, noting that abolishing the cap could lift 350,000 children out of poverty.
Mounting Pressure on Public Finances
The Chancellor cited a 'perfect storm' of external and domestic pressures forcing her hand. She pointed to global instability, fuelled by Donald Trump's tariffs and the ongoing war in Ukraine, combined with a sudden downgrade of UK economic forecasts by the Office for Budget Responsibility (OBR).
Despite the strong indications, Ms Reeves cautioned that final decisions 'haven't been taken yet,' leaving a final announcement for the budget itself. Other rumoured tax measures being considered include replacing stamp duty with a new property tax and introducing a 3p per mile charge for electric vehicles.
The Shadow Chancellor, Sir Mel Stride, was quick to criticise, accusing Ms Reeves of 'trying to pull the wool over your eyes' and blaming others when the numbers do not add up.
