UK Chancellor of the Exchequer Rachel Reeves is under intense pressure at the Labour Party conference in Liverpool on Monday, where she must reassure her party and the markets that she can both hold the line on fiscal discipline and answer calls to outflank the populist right.
The political tension is unmistakable. With borrowing costs at a decade high and a £20 billion gap in the public finances, the Chancellor is confronting an unforgiving arithmetic.
Yields on ten-year gilts hover near 4.75%, the steepest among the G7, tightening the screws on her fiscal rules. The downgrade in productivity forecasts from the Office for Budget Responsibility and the reversal of welfare savings have only deepened the deficit.
deVere Group chief executive Nigel Green warns that the combination of strained public finances and a surging Reform UK in the polls leaves Reeves little room to manoeuvre.
“The Chancellor is boxed in by her own numbers and by political reality,” says Nigel Green. “Markets will demand discipline, but her party will demand action. The path of least resistance is higher taxation.”
Labour’s commanding general-election victory last year has not shielded Reeves from growing internal dissent.
The aborted attempt to remove winter fuel payments from many pensioners, coupled with an inaugural budget that raised taxes and strained relations with business leaders, has eroded her authority.
Meanwhile, Reform UK leader Nigel Farage is capitalising on voter frustration, with fresh surveys suggesting his party could top the polls if an election were held now.
Against this backdrop, Nigel Green believes the November Budget will “inevitably” carry heavier tax measures.
“Investors should take seriously the risk of a broad-based tax grab,” he says. “When gilt yields are this high and the deficit this wide, the Treasury will look for revenue wherever it can find it.”
The Chancellor has refused to rule out extending the freeze on income tax thresholds, a stealth measure that already drags more households into higher brackets each year.
Economists estimate that the current freeze, scheduled until 2028, is set to raise tens of billions in additional revenue as wages rise.
“Threshold creep is a silent tax rise that catches the unwary,” the deVere CEO notes. “Couple that with the possibility of further headline increases and you have a formidable challenge for individuals and businesses alike.”
He adds that the market consequences of delay would be swift. “If the government were to flinch and rely on borrowing, the bond market would punish it instantly. The UK cannot afford a repeat of the Truss-era turmoil of 2022.
“Reeves knows that, and so do investors.”
Nigel Green urges individuals and companies to prepare now.
“This is the moment to review wealth structures, pension contributions, and international planning,” he says. “Waiting until the Budget speech is too late. By then the measures will already be locked in, and the cost of inaction will be permanent.”
Despite the Chancellor’s insistence on pro-growth measures and back-to-work incentives, deVere expects the headline on November 26 to be about revenue.
“The political narrative may be about fairness or growth,” Nigel Green concludes, “but the economic reality is that tax rises are coming. Prudent savers and investors will act before the ink is dry.”
Today’s conference speech will be a test of Reeves’ ability to keep markets calm while her party clamours for spending.
The stakes are high. If she cannot convince both camps, the bond market and her own backbenchers could force even more dramatic measures.
“For now, all signals point to a budget that will reveal a tax raid, and to those who plan ahead, an opportunity to protect hard-earned wealth,” concludes Nigel Green.
