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.

Crypto tokens are becoming increasingly efficient at capturing value, thanks in part to new regulations and upgrades, which could send prices surging in 2026, according to Bitwise chief investment officer Matt Hougan. 

Hougan said in an X post on Saturday that in the chaos of the current market pullback, big news is getting lost, such as the level of value capture in digital assets trending upward. 

“Most of today’s tokens were created in a regulatory era where value capture was risky; as a result, they defaulted to vague governance-style design choices,” he said. 

“Under the new regulatory climate, that’s being unwound. I think we’ll start to feel this effect in 2026.” 

Uniswap rallied after investor-friendly proposal

Uniswap (UNI), the native token behind the crypto protocol of the same name, surged earlier this month after the Uniswap Foundation and Uniswap Labs introduced a proposal to make the token more attractive as an investment.

Among the ideas being floated were a protocol-level fee mechanism to burn the tokens and building a Protocol Fee Discount Auctions system to increase liquidity provider returns.

Hougan said this is one of the most obvious examples of a token trying to capture value, and predicts that if the proposal passes, it could send UNI into the top ten by market cap in the future. 

“The big knock on UNI has always been that it is a governance token. Uniswap is great, but activity on Uniswap didn’t benefit UNI tokenholders,” he said. 

“Except now, UNI is considering flipping the fee switch. If the vote goes through, ~16% of trading fees will be used to burn UNI. I suspect this will push UNI toward being a top 10 token by market cap over time.” 

Fusaka upgrade could see Ether lead rebound

Hougan also pointed to Ethereum’s Fusako upgrade as a catalyst that could “significantly increase token value capture.” 

The Fusako upgrade mainnet launch is expected in December and will roll out upgrades to Ethereum’s execution layer and improvements to staking economics, among other upgrades. 

“I suspect the market will start to orient around the positive impacts of Fusaka soon, particularly if it’s delivered Dec. 3 as expected. It’s an under-appreciated catalyst and one reason ETH could lead the crypto rebound,” Hougan said. 

Related: Bitwise exec says a bet on Solana gives ‘two ways to win’

XRP staking rewards also a boon 

Hougan said Ripples XRP (XRP) token is also on the road to increasing its value capture with a possible staking addition.