The government needs “more urgency” to grow the economy, the business secretary has admitted.

Peter Kyle, who also rejected claims that growth is no longer the top priority, told Sky News deputy political editor Sam Coates that people will “need to see” what happens at the budget on Wednesday.

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He added: “I accept that we need more urgency, we need boldness, because we inherited a growth emergency.

“We are still in that growth emergency that we inherited, and that means we need to act with more boldness, creativity and urgency, and that is what I’ll be doing.”

But Mr Kyle denied that growth is no longer the government’s top priority, following reports Rachel Reeves will abolish the two-child benefit cap, stick to the triple lock uprating for pensioners and the welfare bill being watered down this summer due to Labour MPs rebelling.

He listed reforms Labour has made, including changing the welfare system and trying to lower the number of people out of work due to sickness.

“We are acting in these areas that have been holding back our economy profoundly for years and years, and none of those previous governments have done anything about it,” he said.

The business secretary, who was promoted in the September reshuffle, added: “People know that I can’t just wave a magic wand and have it happen today, but don’t give the impression that we’re not acting on energy prices, because for businesses that need that help the most, they’re getting it.”

Earlier, Mr Kyle told the Confederation of Business Industry conference the government will do “everything we can to turn the corner” to “build a pro-business, pro-wealth creation, pro-growth Britain”.

He said the chancellor will “take the fair and necessary choices” at the budget this week.

“The chancellor will take the tough decisions necessary to keep inflation down, protect families and businesses from rising costs to safeguard the public services and keep debt under control for the long term,” he added.

Read more:
What tax rises will Rachel Reeves announce in the budget?
Wednesday’s budget will be big – in spending, tax and political jeopardy

Mr Kyle also admitted the news billionaires are leaving the UK is a “worry”.

He told Sky News’ Mornings with Ridge and Frost: “Whenever anyone needs to leave the UK to succeed, I think it’s a worry. But what I don’t want to do is, as a country, just focus just on the billionaires because there are other people that have needed to leave.”

He said that while the government has closed some loopholes, it is also making it “easier for people to come here who have high talents”.

Over the weekend, it was revealed one of Britain’s richest men, Indian steel magnate Lakshmi Mittal, has left the UK due to the government’s targeting of the super rich.

Chancellor Rachel Reeves has promised to “grip the cost of living” in the budget – while also saving millions of pounds by raising taxes.

She and Prime Minister Sir Keir Starmer spent weeks laying the groundwork to break their manifesto promise not to raise income tax at the budget, but they will no longer do so.

Sky News understands ministers were working up a plan to lift the basic rate of income tax – perhaps by 2p – and then to simultaneously cut national insurance contributions for those on the basic rate of income tax.

But fearing a backlash from MPs and the public, that idea has been ditched, Sky’s Beth Rigby reports.

So what could actually be announced when Ms Reeves reveals the budget on Wednesday 26 November?

Income tax thresholds frozen

Sky News understands the chancellor is expected to freeze income tax thresholds for another two years beyond 2028, which should raise about £8bn.

As the Financial Times has reported, one option to raise revenue would involve cutting the thresholds at which people pay different rates of income tax, while leaving the headline basic and higher rates of the tax unchanged.

Pensions

Rumours about pension reforms crop up every year, with changes often not materialising. However, Ms Reeves is expected to cap tax-free salary sacrifices for pensions at £2,000 a year to raise £3bn, according to reports.

Staff putting away any more than that would have to pay the standard NI rate: 8% if they earn less than £50,000 and 2% above that.

Companies currently don’t have to pay the 15% employer national insurance tax on cash that goes into workers’ pensions.

A person earning more than £125,000 who sacrificed 20% could pay £460 more, while their employer could pay £3,450 more, according to accountancy firm RSM.

Those on lower salaries would face a much smaller hit. A worker earning £45,000 and sacrificing 5% would pay £30 more, while their employer would pay £34 more.

People earning between £100,000 and £125,140 could be affected the most, given they often use salary sacrifice schemes to sidestep a marginal tax rate of 60% and to keep lucrative child benefits.

The Treasury has already confirmed pensioners will see their state pensions rise by as much as £550 next year under the triple lock pledge, which means the state pension must rise by the highest of wage growth, inflation or 2.5%.

Inheritance tax

A lifetime cap on the value of gifts someone can pass on before they die has also been considered by the Treasury, it is reported.

Currently, there is no charge on gifts if the donor survives seven years but a cap – possibly about £100,000 – on how much people can give before they are taxed could be introduced.

Ms Reeves is also said to be considering extending the seven-year period before inheritance tax has to be paid to 10 years or even longer.

The taper relief rate (the tax discount for living at least three years after giving a gift) is understood to also be under review.

LLPs

The chancellor is reportedly considering imposing a charge on limited liability partnerships (LLP) to raise £2bn.

LLPs are used by about 190,000 people, including lawyers, GPs and accountants, to be considered self-employed, exempting them from employers’ national insurance.

VAT

Ms Reeves previously sparked rumours she is looking at raising VAT by refusing to rule it out.

Labour’s employers’ national insurance increase and putting VAT on private school fees has shown the government is not worried about workarounds to its promise to not raise taxes on “working people”.

She could end lower or zero rates for products such as food and children’s clothes.

The chancellor could also lower the starting threshold for businesses paying VAT – but tax experts say this risks increasing inflation.

Business rates

Legislation to change the business rates system is already due to come into force in April 2026.

The chancellor is expected to confirm the exact rates for each band at the budget, as well as provide further guidance on transitional relief and eligibility criteria.

Stamp duty and council tax

One of the first budget rumours came in August when The Guardian reported the Treasury was considering a new tax on the sale of homes worth more than £500,000 to replace stamp duty.

Under the proposal, sellers, instead of buyers, would be responsible for paying the tax.

Instead of a complete council tax overhaul, which was previously rumoured, the chancellor is said to be looking at a revaluation of properties in the highest council tax bands – F, G and H – which could mean they move up or down a band.

She is also reportedly looking at a surcharge for the most valuable homes (over £2m) at a cost of about £4,500 a year, although owners will be able to defer the payment until they sell or die.

Landlord national insurance

Rent is largely exempt from national insurance at the moment, but there are reports the chancellor is considering applying the same 8% rate as the self-employed on landlords’ rental profits.

This could raise about £2.3bn a year, The Times previously reported.

ISAs

Rumours surrounding the previous budget about cutting the annual tax-free cash ISA limit from £20,000 resurfaced in the summer and autumn.

The latest reports say the chancellor is considering cutting it to £12,000 in an attempt to get people to invest in stocks and shares ISAs instead – and therefore putting much of the £300bn held in cash ISAs into the stock market.

She is also looking at a “British ISA” scheme, where investors get an additional £5,000 tax-free allowance to put into UK-listed shares.

Fuel duty/EVs

There has been a freeze on fuel duty since 2011, while a 5p-per-litre cut from 2022 is to remain in place until March 2026.

But the chancellor could increase fuel duty by up to 3p per litre, according to some reports.

Electric vehicle drivers will be hit with a pay-per-mile tax, The Telegraph reported on 6 November.

EV drivers will be charged 3p per mile on top of other road taxes from 2028, meaning an extra £250 a year, on average.

They will be asked to estimate how many miles they will take and charged on that, with no need for electronic monitors in cars, it is understood.

Van drivers will avoid the pay-per-mile tax but plug-in hybrid cars will be included so will pay both that tax and fuel duty, The Times reports.

The chancellor is expected to extend the EV grant for another year.

Cycle to Work scheme

A cap on how much someone can spend on a bike through the Cycle to Work scheme is expected, the Financial Times reports.

The scheme allows people to save tax on bikes by “loaning” them from their employers, with payments automatically deducted from their salary pre-tax. There is currently no cap on how much a bike can cost.

Two-child benefit cap

Ms Reeves is expected to lift the two-child benefit cap, which has limited parents from claiming child tax credit or universal credit for more than two children since 2017.

The move, which will be welcomed by many Labour MPs, will cost the government £3bn.

Crackdown on benefits fraud

An extension of the Targeted Case Reviews taskforce, which clamps down on inaccurate universal credit claims, is expected in the hope of saving £1.2bn by March 2031.

Last year, a record £6.5bn was lost to universal credit fraud, National Audit Office analysis of government data showed.

Motability

The chancellor had been considering tightening the eligibility criteria for the Motability scheme, which provides a disability allowance to lease cars, scooters or powered wheelchairs.

It could have saved taxpayers £1bn, but social security minister Sir Stephen Timms said on 27 October there will be no changes until next year.

Wealth tax

There has been an increasing number of calls for a wealth tax, which could be an annual charge on those with assets exceeding a certain threshold or a 20% exit tax on the unrealised capital gains of wealthy people leaving Britain.

However, the government has stated neither option is currently under consideration, especially over fear of an exodus of millionaires.

Mansion tax

The chancellor is understood to be looking at an annual 1% charge on the amount a property’s value exceeds £2m – a £10,000-a-year levy for homes worth £3m.

Another proposal would see capital gains tax (CGT) charged when someone sells their main home, based on the amount it has increased in value during ownership.

Reports suggest this would only be applied to the most expensive properties, with a possible threshold of £1.5m, which would affect about 120,000 homeowners and higher-rate taxpayers getting CGT bills of nearly £200,000.

Energy bills

A Treasury spokesman said in October that action to bring down energy prices is among the options being considered at the budget.

Ms Reeves is understood to be considering cutting the 5% VAT rate on bills to zero, a move that would save billpayers about £80 a year and cost £2.5bn to implement.

Gambling tax

The Institute for Public Policy Research (IPPR) thinktank has said increasing gambling taxes would earn the Treasury about £3.2bn extra a year.

Gordon Brown has backed calls for a new tax on profits made by online casinos, slot machines and other high-stakes betting firms.

Tourism tax

The chancellor is expected to announce cities across England can impose a tourist levy on visitors staying overnight. Levies are already coming in Scotland and Wales.

However, it is now expected she will not do this in the budget but through the English Devolution and Community Empowerment Bill, currently going through parliament, which will give regional mayors the power to impose a tourist tax.

London mayor Sir Sadiq Khan has cautiously welcomed the reports, with the Greater London Authority previously estimating a £1 a day levy could raise £91m, and a 5% levy could raise £240m.

Taxi tax

The chancellor is reportedly considering adding VAT to all private hire vehicle journeys, which could increase costs by up to 15% to raise about £750m – although the taxi industry disputes how much it would raise.

At present, VAT is only charged on the profit firms take, rather than the fare itself.

Milkshake tax

Ms Reeves is expected to confirm an end to the sugar tax exemption on milk-based drinks.

Additional reporting by Dylan Donnelly

Wednesday’s budget is going to be big.

It will be big in terms of tax rises, big in terms of setting the course of the economy and public services, and big in terms of political jeopardy for this government.

The chancellor has a lot of different groups to try to assuage and a lot is at stake.

“There are lots of different audiences to this budget,” says one senior Labour figure. “The markets will be watching, the public on the cost of living, the party on child poverty and business will want to like the direction in which we are travelling – from what I’ve seen so far, it’s a pretty good package.”

The three core principles underpinning the chancellor’s decisions will be to cut NHS waiting lists, cut national debt and cut the cost of living. There will be no return to austerity and no more increases in government borrowing.

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What flows from that is more investment in the NHS, already the big winner in the 2024 Budget, and tax rises to keep funding public services and help plug gaps in the government’s finances.

Some of these gaps are beyond Rachel Reeves’ control, such as the decision by the independent fiscal watchdog (the Office for Budget Responsibility) to downgrade the UK’s productivity forecasts – leaving the chancellor with a £20bn gap in the public finances – or the effect of Donald Trump’s tariffs on the global economy.

Others are self-inflicted, with the chancellor having to find about £7bn to plug her reversals on winter fuel allowance and welfare cuts.

By not pulling the borrowing lever, she hopes to send a message to the markets about stability, and that should help keep down inflation and borrowing costs low, which in turn helps with the cost of living, because inflation and interest rates feed into what we pay for food, for energy, rent and mortgage costs.

That’s what the government is trying to do, but what about the reality when this budget hits?

This is going to be another big Labour budget, where people will be taxed more and the government will spend more.

Only a year ago the chancellor raised a whopping £40bn in taxes and said she wasn’t coming back for more. Now she’s looking to raise more than £30bn.

That the prime minister refused to recommit to his manifesto promise not to raise income tax, VAT or national insurance on working people at the G20 in South Africa days ahead of the budget is instructive: this week we could see the government announce manifesto-breaking tax rises that will leave millions paying more.

Freeze to income thresholds expected

The biggest tax lever, raising income tax rates, was going to be pulled but has now been put back in neutral after the official forecasts came in slightly better than expected, and Downing Street thought again about being the first government in 50 years to raise the income tax rate.

On the one hand, this measure would have been a very clean and clear way of raising £20bn of tax. On the other, there was a view from some in government that the PM and his chancellor would never recover from such a clear breach of trust, with a fair few MPs comparing it to the tuition fees U-turn that torpedoed Nick Clegg’s Lib Dems in the 2015 general election.

Instead, the biggest revenue raiser in the budget will be another two-year freeze on income tax thresholds until 2030.

This is the very thing that Reeves promised she would not do at the last budget in 2024 because “freezing the thresholds will hurt working people” and “take more money out of their payslips”. This week, those words will come back to haunt the chancellor.

Two-child cap big headline grabber

There will also be more spending and the biggest headline grabber will be the decision to lift the two-child benefit cap.

This was something the PM refused to commit to in the Labour manifesto, because it was one of the things he said he couldn’t afford to do if he wanted to keep taxes low for working people.

But on Wednesday, the government will announce it’s spending £3bn-a-year to lift that cap. Labour MPs will like it, polling suggests the public will not.

What we are going to get on Wednesday is another big tax and spend Labour budget on top of the last.

For the Conservatives, it draws clear dividing lines to take Labour on. They will argue that this is the “same old Labour”, taxing more to spend more, and more with no cuts to public spending.

Having retreated on welfare savings in the summer, to then add more to the welfare bill by lifting the two-child cap is a gift for Labour’s opponents and they will hammer the party on the size of the benefits bill, where the cost of supporting people with long-term health conditions is set to rise from £65bn-a-year to a staggering £100bn by 2029-30.

Mansion tax on the cards

There is also a real risk of blow-up in this budget as the chancellor unveils a raft of revenue measures to find that £30bn.

There could be a mansion tax for those living in more expensive homes, a gambling tax, a tourism tax, a milkshake tax.

Ministers are fearful that one of these more modest revenue-raising measures becomes politically massive and blows up.

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This is what happened to George Osborne in 2012 when he announced plans to put 20% of VAT on hot food sold in bakeries and supermarkets. The plan quickly became an attack on the working man’s lunch from out-of-touch Tories and the “pasty tax” was ditched two months later.

And what about the voters? Big tax and spend budgets are the opposite of what Sir Keir Starmer promised the country when he was seeking election. His administration was not going to be another Labour tax and spend government but instead invest in infrastructure to turbocharge growth to help pay for better services and improve people’s everyday lives.

Seventeen months in, the government doesn’t seem to be doing things differently. A year ago, it embarked on the biggest tax-raising budget in a generation, and this week, it goes back on its word and lifts taxes for working people. It creates a big trust deficit.

Government attempts to tell a better story

There are those in Labour who will read this and point to worse-than-expected government finances, global headwinds and the productivity downgrades as reasons for tax raising.

But it is true too that economists had argued in the run-up to the election that Labour’s position on not cutting spending or raising taxes was unsustainable when you looked at the public finances. Labour took a gamble by saying tax rises were not needed before the election and another one when the chancellor said last year she was not coming back for more.

After a year-and-a-half of governing, the country isn’t feeling better off, the cost of living isn’t easing, the economy isn’t firing, the small boats haven’t been stopped, and the junior doctors are again on strike.

Read more:
Reeves hints at more welfare cuts
Reeves vows to ‘grip the cost of living’
What tax rises could chancellor announce?

The PM told me at the G7 summit in Canada in June that one of his regrets of his first year wasn’t “we haven’t always told our story as well as we should”.

What you will hear this week is the government trying to better tell that story about what it has achieved to improve people’s lives – be that school breakfast clubs or extending free childcare, increasing the national living wage, giving millions of public sector workers above-inflation pay rises.

You will also hear more about the NHS, as the waiting lists for people in need of non-urgent care within 18 weeks remain stubbornly high. It stood at 7.6m in July 2024 and was at 7.4m at the end of September. The government will talk on Wednesday about how it intends to drive those waits down.

But there is another story from the last 18 months too: Labour said the last budget was a “once in a parliament” tax-raising moment, now it’s coming back for more. Labour said in the election it would protect working people and couldn’t afford to lift the two child-benefit cap, and this week could see both those promises broken.

Can PM convince his MPs?

Labour flip-flopped on winter fuel allowance and on benefit cuts, and is now raising your taxes.

Downing Street has been in a constant state of flux as the PM keeps changing his top team, the deputy prime minister had to resign for underpaying her tax, while the UK’s ambassador to the US, Peter Mandelson, was sacked over his ties to the Jeffrey Epstein, the late convicted paedophile. It doesn’t seem much like politics being done differently.

All of the above is why this budget is big. Because Wednesday is not just about the tax and spend measures, big as they may be. It is also about this government, this prime minister, this chancellor. Starmer said ahead of this budget that he was “optimistic” and “if we get this right, our country has a great future”.

But he has some serious convincing to do. Many of his own MPs and those millions of people who voted Labour in, have lost confidence in their ability to deliver, which is why the drumbeat of leadership change now bangs. Going into Wednesday, it’s difficult to imagine how this second tax-raising budget will lessen that noise around a leader and a Labour government that, at the moment, is fighting to survive.