Budget 2025: Reeves vows to ‘defy’ gloomy forecasts – but faces income tax warning
Rachel Reeves has said she is determined to “defy” forecasts that suggest she will face a multibillion-pound black hole in next month’s budget, but has indicated there are some tough choices on the way.
Writing in The Guardian, the chancellor argued the “foundations of Britain’s economy remain strong” – and rejected claims the country is in a permanent state of decline.
Reports have suggested the Office for Budget Responsibility is expected to downgrade its productivity growth forecast by about 0.3 percentage points.
Rachel Reeves. PA file pic
That means the Treasury will take in less tax than expected over the coming years – and this could leave a gap of up to £40bn in the country’s finances.
Ms Reeves wrote she would not “pre-empt” these forecasts, and her job “is not to relitigate the past or let past mistakes determine our future”.
“I am determined that we don’t simply accept the forecasts, but we defy them, as we already have this year. To do so means taking necessary choices today, including at the budget next month,” the chancellor added.
She also pointed to five interest rate cuts, three trade deals with major economies and wages outpacing inflation as evidence Labour has made progress since the election.
Speculation is growing that Ms Reeves may break a key manifesto pledge by raising income tax or national insurance during the budget on 26 November.
Read more from Sky News:
What tax rises could Reeves announce?
Start-ups warn chancellor over budget bombshell
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Chancellor faces tough budget choices
Budget decisions ‘don’t come for free’
Although her article didn’t address this, she admitted “our country and our economy continue to face challenges”.
Her opinion piece said: “The decisions I will take at the budget don’t come for free, and they are not easy – but they are the right, fair and necessary choices.”
Yesterday, Sky’s deputy political editor Sam Coates reported that Ms Reeves is unlikely to raise the basic rates of income tax or national insurance, to avoid breaking a promise to protect “working people” in the budget.
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Tax hikes possible, Reeves tells Sky News
Sky News has also obtained an internal definition of “working people” used by the Treasury, which relates to Britons who earn less than £45,000 a year.
This, in theory, means those on higher salaries could be the ones to face a squeeze in the budget – with the Treasury stating that it does not comment on tax measures.
In other developments, some top economists have warned Ms Reeves that increasing income tax or reducing public spending is her only option for balancing the books.
Experts from the Institute for Fiscal Studies have cautioned the chancellor against opting to hike alternative taxes instead, telling The Independent this would “cause unnecessary amounts of economic damage”.
Although such an approach would help the chancellor avoid breaking Labour’s manifesto pledge, it is feared a series of smaller changes would make the tax system “ever more complicated and less efficient”.
Parliament’s spending watchdog has asked the Crown Estate to explain the rationale behind Prince Andrew’s “peppercorn” rent at Royal Lodge.
The Public Accounts Committee (PAC) has written to the Treasury and the Crown Estate after raising concerns over the value for money of the prince’s living arrangements.
The King‘s team is said to be in talks with his brother about leaving the property voluntarily following renewed controversy over his links to the late paedophile financier Jeffrey Epstein.
Andrew signed a 75-year lease in 2003 after paying an initial down payment of £1m and spent £7.5m on renovations as part of the agreement. He lives there with his ex-wife, Sarah Ferguson.
Prince Andrew lives at Royal Lodge with his ex-wife
“Peppercorn rent” is a legal term used in leases to show that rent technically exists, so the lease is valid, but it’s nominal, often literally £1 a year or just a symbolic amount. In practice, it means the tenant pays no rent.
In a letter published on Wednesday, PAC chairman and Tory MP Sir Geoffrey Clifton-Brown, said: “There is considerable and understandable public interest in the spending of public money in relation to Prince Andrew, which in part stems from the fact that he is no longer a working Royal and from serious and disturbing allegations made against him.”
He asked “that you write to us providing an update on the status of, and rationale for, the lease”.
Prince Andrew gave up his titles ahead of the publication of the posthumous memoirs of Virginia Giuffre, who accused the prince of sexually abusing her as a 17-year-old. He has strenuously denied the allegations.
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Calls for Prince Andrew to leave Royal Lodge: Is it that simple?
Criticism has now turned to the 30-room mansion in Windsor he has lived in effectively rent-free since 2003.
Sir Geoffrey said the Crown Estate has a duty to manage its land “according to the best consideration of money or money’s worth which in their opinion can be reasonably obtained”.
Read more:
Where could Prince Andrew move to if he leaves Royal Lodge?
No simple solution to problem of Prince Andrew and Royal Lodge
The mansion has 30 rooms. Pic: Sky News
He went on: “We are therefore concerned as to whether the lease arrangements for Royal Lodge are, in light of recent developments and changes in the responsibilities of Prince Andrew, achieving the best value for money.
“They must also be justifiable in comparison to other options for the use or disposal of the property.
“It is also a matter of concern to the committee that the terms of the lease, including those relating to maintenance, are being effectively enforced to maintain the value and character of this nationally important royal residence.”
He has requested a response on or before 28 November, and said the committee will then decide if a public evidence session should be held.
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