Published by Global Banking and Finance Review
Posted on November 4, 2025
5 min readLast updated: January 21, 2026
UK Finance Minister Rachel Reeves outlines tough choices in the upcoming budget, signaling potential tax rises to manage public spending and reduce debt.
LONDON (Reuters) -British finance minister Rachel Reeves on Tuesday framed her upcoming second annual budget as one of "hard choices" to secure public spending while reducing Britain's debt, signalling possible broad tax rises to avoid a return to "austerity".
Reeves, in a rare pre-budget speech, added that while progress had been made, "there is more to do."
Britain's 10-year borrowing costs were last 3 basis points lower at 4.41%, helping send the pound down 0.5% on the dollar to $1.3074.
London's FTSE-100 index was down 1% having extended its fall slightly from before Reeves started speaking.
COMMENTS:
JANE FOLEY, HEAD FX STRATEGIST, RABOBANK, LONDON:
"There's one element of the communication that we've had today, but also in recent speeches, that, compared with last year's budget, (Reeves) does seem to be more aware of the potential inflationary impact that her measures could make."
"She, today again but also in recent speeches, has indicated that she sees her responsibility as a joint responsibility with the Bank of England in bringing inflation down and that gives a strengthened indication that she isn't going to be announcing measures that are going to add to inflation."
KIT JUCKES, HEAD OF CURRENCY STRATEGY, SOCIETE GENERALE, LONDON:
"She (Reeves) is justifying tough decisions to come in the budget. The fact that this is happening at all means that manifesto pledges will be not be followed to the letter.
We're going to have higher taxes.
The only thing has not prevented Sterling falling is that we haven't had lower rates
This is a budget that is intended to deliver lower interest rates, that is the whole plan here. If Reeves get that we will get lower rates and a weaker pound."
HENRY COOK, SENIOR EUROPE ECONOMIST, MUFG, LONDON:
"She's (Reeves) clearly laying the ground for tax rises, and setting out the context there."
"I think from the market's perspective, she continues to make the right noises. She says the decisions will be focused on keeping inflation falling - the conditions for interest rate cuts - and says there's an iron clad commitment to the fiscal rules, but I think the devil will be in the detail.
It is also notable she said the government will be committed to reforming the welfare state."
JAMES ROSSITER, SENIOR GLOBAL STRATEGIST, TD SECURITIES, LONDON:
"At the end of the day, she (Reeves) wants to get debt down and she doesn't want to cut spending, so there's only one option and that is to raise taxes.
The OBR forecasts will evolve in the next few weeks, and, in fairness to her, she has not made final decisions, but she knows she doesn't have many options here.
She would not reiterate the manifesto pledges at all, so that means she is keeping options open.
This is also ahead of the BoE meeting so their view is out in the public. We think the BoE will cut rates on Thursday.
This should be treated as a dovish speech but markets are expecting this and have largely taken it in their stride."
DAVID MORRISON, SENIOR MARKET ANALYST, TRADE NATION, UK:
"It's quite an unusual move for her to stand at 11 Downing St. and make an announcement a few weeks before the budget. It is a way of saying, look, this is the situation and this is what we've been dealing with. She's preparing the markets for breaking the manifesto pledge not to raise taxes.
If all they're talking about is the tax side of the equation, as we've seen previously, they seem incapable of doing anything on the spending side, then I don't think that's going to get a very positive reaction. It's only right that they address the spending side of the ledger and if they don't, then I don't think the market reaction is going to be very positive."
MICHAEL BROWN, SENIOR RESEARCH STRATEGIST, PEPPERSTONE, LONDON:
"Everything about it is odd to be completely honest with you. The budget is not for three weeks. The fact that the chancellor is speaking three weeks beforehand is strange. I'm not entirely sure who the speech was aimed at.
It doesn't seem like it would have done anything to soothe the concerns of market participants, certainly not with cable (GBP/USD) trading to new lows since mid-April, as we speak.
It doesn't look like it was aimed at the voter either given what she was saying.
The big takeaway is she has refused to reiterate those manifesto promises which essentially paves the way for an income tax hike, she was also talking about how she wants to build a greater degree of fiscal headroom which means that we're going to have even more tax hikes than you would have been expecting .
So obviously sterling is repricing lower on the back of what is going to be another round of very stiff headwinds to economic growth.
A strange one, when you look, Rachel Reeves is speaking you would expect some sort of reassurance...some sort of concrete measures, and there just weren't."
(Reporting by the London Markets Team; Compiled by Dhara Ranasinghe, editing by Alun John)
Debt reduction is the process of decreasing the total amount of money that is owed by an individual or organization, often through repayment strategies or financial restructuring.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power and often measured by the Consumer Price Index (CPI).
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