Chancellor Rachel Reeves is preparing for her second budget on November 26, which may face challenges similar to last year’s unpopular winter fuel cut. The upcoming budget aims to clarify how Labour will approach taxation in the context of its proposed economic renewal. At a recent conference, Reeves received strong support for her call for investment over austerity and emphasized Labour’s differences from the Conservative Party. However, she did not outline specific principles for determining which groups would bear the burden of tax increases.
Reeves must navigate a complex communication challenge, as the Office for Budget Responsibility has projected a need for at least £20 billion in tax increases due to longstanding productivity issues in the UK economy. This development is framed as a response to years of austerity under Conservative leadership. Critics note that without a compelling narrative, a tax-increasing budget could face significant scrutiny.
There are suggestions that Labour is considering more radical tax reforms to create a fairer system. The Institute for Fiscal Studies (IFS) has emphasized the importance of a structured vision rather than isolated tax hikes. They point out disparities in the current tax system that lead to unequal tax obligations for individuals with similar incomes. Research by the think tank Demos indicates a public willingness to support progressive tax changes aimed at addressing these inequities, including imposing national insurance on rental income and reforming capital gains taxation.
Polling has shown that proposals such as additional council tax on high-value properties received positive feedback, while increases to basic income tax faced significant opposition. However, sticking to existing manifesto pledges may limit the government’s ability to adapt its tax strategy effectively. If Reeves plans to implement reforms, experts advise a comprehensive approach that aligns both growth and fairness, rather than simply listing revenue-raising measures. The time frame before the budget highlights the urgency for Reeves to build a strong rationale for her proposed financial policies.
Source: https://www.theguardian.com/business/2025/oct/05/rachel-reeves-second-budget-narrative-fairness-tax-rises