Rachel Reeves Warns of Tax Hikes and Spending Cuts in Autumn Budget

UK Chancellor cites Brexit, austerity and the Liz Truss mini budget as major causes of Britain’s fiscal shortfall.

Chancellor Rachel Reeves has warned that the UK upcoming autumn budget could include both tax increases and spending cuts as she faces the challenge of closing a growing £50 billion shortfall in public finances.

Speaking to Sky News, Reeves said the government was committed to ensuring that the “numbers add up,” pointing to past fiscal mismanagement under the Conservatives as a warning. “We saw just three years ago what happens when a government loses control of the public finances inflation and interest rates went through the roof,” she said.

The chancellor confirmed that both tax and spending are under review ahead of her 26 November budget statement, describing the situation as one that demands discipline and transparency.

Brexit’s Lingering Economic Toll

Reeves did not shy away from naming Brexit as a key factor behind Britain’s current economic struggles. She said the “impact of Brexit is severe and long-lasting,” adding that economists had predicted the UK economy would be around 4% smaller as a result of leaving the European Union.

The chancellor also pointed to austerity measures and the aftermath of Liz Truss’s mini budget as contributors to the present crisis. “We’re still living with the consequences of decisions made years ago,” Reeves noted.

Despite this, she emphasized that the Labour government is “slowly undoing some of that damage,” citing recent agreements with the EU on food, farming, youth mobility, and energy trading. Her administration, she said, remains focused on “deepening trade ties, most importantly with the EU.”

Balancing Austerity with Growth

The Office for Budget Responsibility (OBR) recently warned of a productivity downgrade that could make the chancellor’s fiscal task even harder. Reeves acknowledged that the OBR had “consistently overestimated” UK productivity and said the new forecast would require “tough decisions” to restore balance.

Economists estimate that the Treasury is now facing a £50 billion fiscal gap, including a £6 billion shortfall following the government’s reversal on winter fuel payments for pensioners and its decision to halt cuts to the welfare budget.

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Reeves said her strategy would be to combine fiscal discipline with a growth-driven agenda. “Sustained economic growth is the only real way forward. It’s what brings in the revenues that allow us to invest in public services and keep taxes low in the long run,” she explained.

Refusing to Rule Out Tax Increases

Pressed repeatedly about possible tax rises, Reeves refused to rule them out, saying her priority was ensuring that “the country’s finances are sustainable.” She described the UK’s current situation as a “doom-loop” where weak growth limits fiscal headroom, forcing tax hikes that in turn suppress growth further.

“Nobody wants to end that cycle more than I do,” Reeves said, stressing that the focus would be on long-term economic expansion rather than short-term austerity.

She pointed to signs of resilience in the economy, noting that Britain was the fastest-growing G7 economy in the first half of the year, and that business investment was showing improvement. However, she acknowledged that cost-of-living pressures remain severe for many households.

Infrastructure Push and Planning Reform

Reeves used the interview to reaffirm her reputation as the “builder chancellor,” pledging to fast-track long-stalled infrastructure projects and overhaul the country’s slow-moving planning system.

She confirmed government backing for the Lower Thames Crossing, a major transport link connecting Kent and Essex, and promised reforms that would cut judicial review timelines by six months. Specialized judges, she said, will be appointed to handle complex planning cases.

“The planning application for the Lower Thames Crossing alone has 350,000 pages longer than the complete works of Shakespeare,” Reeves remarked. “That’s not acceptable. We used to be able to get things built faster in this country, and we will again.”

She said the forthcoming Planning and Infrastructure Bill would be one of the largest pieces of legislation passed by the Labour government, aiming to “swing the pendulum in favor of those who want to get things done in Britain.”

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