Wednesday’s budget is going to 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 different groups to try to assuage and a lot at stake.

“There are lots of difference 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 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 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 its 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 support 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.

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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.

A Royal Navy patrol ship has intercepted two Russian vessels off the UK coast, the Ministry of Defence has said.

It comes after Defence Secretary John Healey announced last Wednesday that lasers from Russian spy ship the Yantar were directed at RAF pilots tracking it, in an attempt to disrupt the monitoring.

The MoD said on Sunday that in a “round-the-clock shadowing operation”, the Royal Navy ship HMS Severn has intercepted Russian warship RFN Stoikiy and tanker Yelnya off the UK coast in the past fortnight.

The Russian vessels sailed through the Dover Strait and westward through the English Channel, the MoD said.

HMS Severn later handed over monitoring duties to a NATO ally off the coast of Brittany, France, it said, but continued to watch from a distance and remained ready to respond to any unexpected activity.

The ministry added that the UK’s armed forces are on patrol “from the English Channel to the High North” amid increased Russian activity threatening UK waters.

Last week, Russia accused the British government of “provocative statements” after the defence secretary warned the Yantar was nearing the UK.

At a news conference in Downing Street on Wednesday, Mr Healey said the spy ship was on the edge of British waters north of Scotland, having entered wider UK waters over the last few weeks.

He said it was the second time this year the Yantar had been deployed off the UK coast and he claimed it was “designed for gathering intelligence and mapping our undersea cables”.

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Mr Healey said the ship had “directed lasers” at pilots of a P-8 surveillance aircraft monitoring its activities – a Russian action he deemed “deeply dangerous”.

In a clear message to Russian President Vladimir Putin, the defence secretary said: “We see you. We know what you are doing. And we are ready.”

The ministry said while tracking the Yantar, Royal Navy frigate HMS Somerset and other civilian ships in the area “experienced GPS jamming in a further demonstration of unprofessional behaviour, intended to be disruptive and a nuisance”.

Russia’s UK embassy dismissed the accusations and insisted the Yantar is a research ship in international waters.

The defence secretary also repeated government plans to increase defence spending and work with NATO allies to bolster European security.

And he stressed how plans to buy weapons and build arms factories will create jobs and economic growth.

A report by a group of MPs, also released on Wednesday, underlined the scale of the challenge the UK faces.

It accused the government of lacking a national plan to defend itself from attack.

The Defence Select Committee also warned that Mr Healey, the prime minister and the rest of the cabinet are moving at a “glacial” pace to fix the issue and are failing to launch a “national conversation on defence and security” – something Sir Keir Starmer had promised last year.

The UK has seen a 30% increase in Russian vessels threatening UK waters in the past two years, according to the MoD.

But the ministry maintained the UK has a wide range of military options at its disposal to keep UK waters safe.

Three RAF P-8 Poseidon aircraft have deployed to Keflavik Air Base in Iceland in the largest overseas deployment of the RAF P-8 fleet so far, the MoD said.

They are conducting surveillance operations as part of NATO’s collective defence, patrolling for Russian ships and submarines in the North Atlantic and Arctic.

The operations come just weeks after HMS Duncan tracked the movements of Russian destroyer Vice Admiral Kulakov, and frigate HMS Iron Duke was dispatched to monitor Russian Kilo-class submarine Novorossiysk.

West Midlands Police has defended the ban on Maccabi Tel Aviv fans attending an Aston Villa match after it was claimed that false intelligence was used.

Supporters of the Israeli club were barred from the Europa League fixture at Villa Park on 6 November.

West Midlands Police chief superintendent Tom Joyce told Sky News before the game that a “section” of Maccabi’s fanbase engaged in “quite significant levels of hooliganism”.

According to The Sunday Times, West Midlands Police claimed in a confidential dossier that when Maccabi played Ajax in Amsterdam last year, Israeli fans threw “innocent members of the public into the river”, and added that between 500 and 600 supporters had “intentionally targeted Muslim communities”.

The report also said 5,000 Dutch police officers had been deployed in response.

However, the Netherlands’ national police force has questioned the claims, reportedly describing information cited by its British officers as “not true” and in some instances obviously inaccurate.

Sebastiaan Meijer, a spokesman for the Amsterdam division, told The Sunday Times that he was “surprised” by allegations in the West Midlands Police report, which had linked 200 travelling supporters to the Israel Defence Forces (IDF).

Mr Meijer denied that his force had such intelligence, adding that the claim was meaningless given the country had a policy of conscription.

Also, Mr Meijer said that Amsterdam’s force “does not recognise” the claim in the British report, attributed to Dutch law enforcement, that Israelis were “highly organised, skilled fighters with a serious desire and will to fight with police and opposing groups”.

The Dutch police added that the only known case of a fan being in the river appeared to involve a Maccabi supporter. While being filmed, he was told he could leave the water on the condition that he said “Free Palestine”.

In an interview with Sky News before the game, West Midlands Police referenced disorder when Maccabi played Ajax in Amsterdam last November.

Mr Joyce said ahead of the Villa Park match: “We’ve had examples where a section of Maccabi fans were targeting people not involved in football matches, and certainly we had an incident in Amsterdam last year which has informed some of our decision-making.

“So it is exclusively a decision we made on the basis of the behaviour of a sub-section of Maccabi fans, but all the reaction that could occur obviously formed part of that as well.”

Maccabi’s visit to Birmingham came amid heightened tensions due to Israel’s war on Hamas in Gaza.

A safety advisory group (SAG) recommended that Maccabi fans should be banned from attending the fixture on the advice of the police. The ban drew criticism, and Prime Minister Sir Keir Starmer said it was the “wrong decision”.

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West Midland Police’s statement in full

Following The Sunday Times report, West Midlands Police stood by its “information and intelligence”, adding that the “Maccabi Fanatics… posed a credible threat to safety”.

In a statement to Sky News, the force said: “West Midlands Police’s evaluation was based primarily on information and intelligence and had public safety at its heart.

“We assessed the fixture between Ajax and Maccabi Tel Aviv in Amsterdam as having involved significant public disorder.

“We met with Dutch police on 1 October, where information relating to that 2024 fixture was shared with us.

“Informed by information and intelligence, we concluded that Maccabi Tel Aviv supporters – specifically the subgroup known as the Maccabi Fanatics – posed a credible threat to public safety.

“The submission made to the SAG safety advisory group was based on information and intelligence which helped shape understanding of the risks.

“West Midlands Police commissioned a peer review, which was conducted by UKFPU [United Kingdom Policing Unit], the NPCC [National Police Chiefs’ Council] and subject matter experts.

“This review, carried out on 20 October, fully endorsed the force’s approach and decision-making.

“We are satisfied that the policing strategy and operational plan was effective, proportionate, and maintained the city’s reputation as a safe and welcoming place for everyone.”

Sky News has approached Dutch police for comment.