Rachel Reeves used a rare pre‑Budget address from No 10 to say necessary choices are coming. Asked directly if rises to Income Tax, VAT or National Insurance were off the table, the chancellor declined to repeat Labour’s election pledge, saying she was setting the context for the Budget.

Her pitch was for growth with fairness. Reeves said the priority is to protect households from high inflation and borrowing costs, shield public services from a return to austerity and keep debt under control. The message was clear: everyone will have to contribute.

Pressed on specifics, Reeves would not name which taxes could rise. She said she would prioritise what is necessary rather than popular, arguing that poor productivity and years of stop‑start investment have left the UK exposed. She blamed Conservative policy choices - including Brexit, austerity and cuts to infrastructure - alongside persistent global inflation and uncertainty from new US tariffs under Donald Trump.

The political response was immediate. Conservative leader Kemi Badenoch branded the remarks ‘one long waffle bomb’ and urged ministers to look at Tory‑style stimulus such as scrapping stamp duty. The Liberal Democrats’ Daisy Cooper said the government had run out of excuses and warned the Budget could be a tough read for households.

Inside government, some favour a one‑and‑done Budget that raises enough now to avoid repeated top‑ups driven by the Office for Budget Responsibility’s forecasts. That points towards at least one Income Tax rate increase, but the political risk is obvious given low trust in politics and in Prime Minister Sir Keir Starmer personally.

Think‑tanks are setting out options. The Resolution Foundation - a group with close links to Labour and previously led by Treasury minister Torsten Bell - argued that avoiding Income Tax, VAT or National Insurance entirely would do more harm than good. Its pre‑Budget work suggests pairing an Income Tax rise with a 2p cut to employee National Insurance to raise about £6bn overall while shielding most workers. Extending the freeze on personal tax thresholds by two years beyond April 2028 would add roughly £7.5bn.

Raising the basic rate has long been treated as a 50‑year taboo; the last chancellor to do it was Labour’s Denis Healey in 1975. That history explains why ministers keep stressing principles over numbers, even as the gap between the fiscal rules and weaker growth narrows.

Attention now shifts to the OBR. Broad expectations are for a downgrade to UK productivity later this month, which could widen the hole Reeves must fill by as much as £20bn. She described commitment to her self‑imposed fiscal rules as iron‑clad and argued that building more headroom would support investment by giving businesses greater confidence.

Markets listened. BBC reporting noted sterling slipped to a seven‑month low near $1.31 after the speech - the weakest since early April - with analysts also pointing to a stronger dollar. Government borrowing costs dipped as Reeves spoke before edging back slightly above pre‑speech levels, a reminder that gilt yields remain sensitive to fiscal signalling.

For investors, SMEs and households, the read‑across is practical. If a rate rise or threshold freeze lands, more pay is pulled into higher bands while employer payroll costs nudge up. Finance teams have a short window to refresh cashflow, test payroll scenarios including a potential 2p NI cut offset elsewhere, and review debt‑service plans if gilt volatility feeds through to swap and mortgage pricing. The Budget is close; the messaging is already here.