Sir Keir Starmer and Rachel Reeves have hinted at tax rises to come when the chancellor delivers the budget later this month.

In a Downing Street speech this morning, Ms Reeves will address “speculation” that an increase in income tax will be announced during the highly-anticipated statement on 26 November.

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Sky News political editor Beth Rigby said it was “highly unusual” for the chancellor to make such a speech, but the Treasury believes she must “try to prepare the ground and make the argument for another big tax-raising budget”.

“I will make the choices necessary to deliver strong foundations for our economy – for this year, and years to come,” Ms Reeves will say.

Last night, Sir Keir gave Labour MPs a taste of what’s to come by warning of the need for “tough but fair” decisions.

Speaking at a party meeting in Westminster, he said the budget “takes place against a difficult economic backdrop”.

“It’s becoming clearer the long-term impact of Tory austerity, their botched Brexit deal and the pandemic on Britain’s productivity is worse than even we feared,” the prime minister said.

“Faced with that, we will make the tough but fair decisions to renew our country and build it for the long term.”

It comes after Sir Keir refused to confirm at Prime Minister’s Questions last week that the budget would honour his party’s manifesto pledge not to raise income tax, national insurance or VAT.

Having raised taxes in last year’s budget, notably national insurance on employers, Ms Reeves has also previously promised not to “come back for more” during this parliament.

The PM and chancellor’s warnings come after reports suggested the Office for Budget Responsibility is expected to downgrade its productivity growth forecast for the UK by about 0.3 percentage points.

That would leave Ms Reeves with a larger than expected fiscal black hole to fill, possibly up to £30bn.

She is said to be considering a proposal from The Resolution Foundation, a left-leaning thinktank close to the government, to raise income tax by 2p but cut national insurance by the same amount.

The thinktank, which used to be headed by Torsten Bell, a Labour MP who is now a key aide to Ms Reeves and a pensions minister, said the move would raise vital cash while protecting working people.

Reeves to prioritise NHS and cost of living

Giving a further flavour of what to expect, Ms Reeves will this morning vow to make “important choices that will shape our economy for years to come”.

“It is important that people understand the circumstances we are facing, the principles guiding my choices – and why I believe they will be the right choices for the country,” she will add.

Ms Reeves will say her priorities are cutting national debt, easing the cost of living and protecting the NHS.

“It will be a budget led by this government’s values,” she’s set to say.

“Of fairness and opportunity and focused squarely on the priorities of the British people: protecting our NHS, reducing our national debt and improving the cost of living.”

The US ambassador to the UK has said Britain should carry out “more drilling and more production” in the North Sea.

In his first broadcast interview in the job, Warren Stephens urged the UK to make the most of its own oil and gas reserves to cut energy costs and boost the economy.

“Electricity costs are four times ours in the UK, versus the US,” he told Mornings with Ridge and Frost.

“I want the UK economy to be as strong as it possibly can be, so the UK can be the best ally to the US that it possibly can be.

“Having a growing economy is essential to that – and the electricity costs make it very difficult.”

Mr Stephens told Wilfred Frost he hoped Britain would “examine the policies in the North Sea and frankly, make some changes to it that allows for more drilling and more production”.

“You’re using oil and gas, but you’re importing it. Why not use your own?” he asked.

The ambassador said he had held meetings with Sir Keir Starmer on the energy issue while US President Donald Trump was in the room, and that the prime minister was “absolutely” listening to the US view.

“I think there are members of the government that are listening,” Mr Stephens told Sky News. “There is a little bit of movement to make changes on the policy and I’ll hope that will continue.”

Energy Secretary Ed Miliband has said the UK should be prioritising net zero by 2030 to limit climate change, rather than issuing new oil and gas drilling licences.

However, the ambassador said it would take “all energy for all countries to compete” in the future, given the huge power demands of data centres and AI.

“I don’t think Ed Miliband is necessarily wrong,” said Mr Stephens. “But I think it’s an incorrect policy to ignore your fossil fuel reserves, both in the North Sea and onshore.”

The ambassador hosted Mr Trump on the first night of his second UK state visit in September – a trip that was seen as a success by both sides.

Mr Stephens said Mr Trump and Sir Keir had a “great relationship” and pointed to the historic ties between Britain and the US as a major factor in June’s trade deal and the favourable tariff rate on the UK.

“The president really loves this country,” the ambassador told Sky News.

“I don’t think it’s coincidental that the tariff rates on the UK are generally a third, or at worst half, of what a lot of other countries are facing.

“I think the prime minister and his team did a great job of positioning the United Kingdom to be the first trade deal, but also the best one that’s been struck.”

Mr Stephens – who began his job in London in May – also touched on the Ukraine war and said Mr Trump’s patience with Russia was “wearing thin”.

The Alaska summit between Mr Trump and Vladimir Putin failed to produce a breakthrough, and the US leader has admitted the Russian president may be “playing” him so he can continue the fighting.

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The ambassador told Sky News he had always favoured a tough stance on Russia and was “delighted” when Mr Trump sanctioned Russia’s two biggest oil firms a few weeks ago.

However, he emphasised the president’s call that other countries must stop buying Russian energy to really tighten the screw.

“The president, has been, I would say, careful in ramping up pressure on Russia. But I think his patience is wearing out,” said Mr Stephens.

“One of the problems is a lot of European countries still depend on Russian gas,” he added.

“We’re mindful of that. We understand that, but until we can really cut off their ability to sell oil and gas around the world, they’re going to have money and Putin seems intent on continuing the war.”

The ambassador also struck a cautious but hopeful tone on future US and UK relations with China.

It comes after Mr Trump said his meeting this week with President Xi Jinping was a “12/10”, raising hopes the trade war between the superpowers could be simmering down.

China’s huge economy is too big to ignore – but it remains a major spy threat; the head of MI5 warned last month of an increase in “state threat activity” from Beijing (as well as Russia and Iran).

Mr Stephens praised the country’s economy and said it would be “terrific” if China could one day be considered a partner.

But he warned “impatient” China is ruthlessly focused on itself only, and would like to see the US and the West weakened.

“There’s certainly things we want to be able to do with China,” added the ambassador.

“And I know the UK wants to do things with China. The United States does, too – and we should. But I think we always need to keep in the back of our mind that China does not have our interests at heart.”

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Ryanair’s boss has accused the chancellor of having no idea how to grow the UK economy as the airline reported hikes to fares had delivered a 42% rise in half-year profits.

Michael O’Leary told Sky’s Mornings with Ridge and Frost programme that Rachel Reeves “hasn’t the rashers how to deliver growth” while taking aim at a planned rise in air passenger duty slated for next April.

He called for the hike, revealed at her first budget last October, to be reversed in her speech to the Commons on 26 November – a budget business believes could further harm investment in jobs and growth.

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“Until she starts cutting these insane taxes and stop trying to tax wealth, the UK economy is doomed to continue to fail”, he said.

“But, in a bizarre way, that’s probably good for Ryanair’s business because as people get more price sensitive, more and more of them will fly Ryanair,” he concluded.

Mr O’Leary was speaking after the no frills carrier, which is Europe’s largest airline by passenger numbers, reported profit after tax in the six months to the end of September came in at €2.54bn (£2.2bn).

The better-than-expected sum followed a second quarter recovery for fares – the cost of a seat before add-ons – in the wake of a 7% decline across its last financial year.

Ryanair said revenues per passenger were up 9% over the six months, helped by a 13% rise in fares and higher revenues from additional things like baggage fees and seat selection.

It reported record passenger numbers of 119 million for the half year – the summer season that tends to be the most profitable – and guided that fares, despite some discounting, were on track to end the financial year on a positive footing.

The airline raised its passenger traffic forecast due to earlier-than-expected deliveries of more efficient Boeing aircraft and strong first-half demand.

Ryanair said it expected to fly 207 million passengers in the year to the end of March, up from an earlier forecast of 206 million.

Mr O’Leary told investors: “While Q3 forward bookings are slightly ahead of (PY) prior year, particularly across the Oct. mid-term and Christmas peaks, we would caution that we face more challenging PY fare comps in H2 (second half) making fare growth more challenging”.