Reeves promises 'fair' Budget amid rumours of income tax hike

The Chancellor will lay out more detail of this month's Budget during a speech from Downing Street on Tuesday after reports Labour could break maifesto promises.

She is expected to say she will 'make the choices necessary to deliver strong foundations for our economy" for "years to come."

Ms Reeves is expected to lay out three key priorities of cutting national debt, easing the cost of living and protecting the NHS.

She will add: "It will be a Budget led by this Government’s values, of fairness and opportunity and focused squarely on the priorities of the British people.

Read more: Britain’s entrepreneurs deserve better than Rachel Reeves’ red tape revolution

Read more: Labour refuses to allow 'rebel' MPs back into the party because they 'haven’t been punished enough'

"You will all have heard a lot of speculation about the choices I will make. I understand that these are important choices that will shape our economy for years to come.

"But it is important that people understand the circumstances we are facing, the principles guiding my choices – and why I believe they will be the right choices for the country."

The speech is a bid to roll the pitch for a difficult autumn statement on November 26, in which the Chancellor is widely expected to raise taxes to plug a hole in the public finances.

Economists at the Institute for Fiscal Studies have already predicted that she would need to find £22 billion to restore the £10 billion of headroom she previously left herself against her self-imposed debt targets.

It comes as Ms Reeves is rumoured to be considering a proposal by the Resolution Foundation, a think tank with close links to the Treasury, to raise income tax by 2p on the pound while cutting national insurance by the same amount.

Asked on Monday whether the Budget would leave that pledge intact, the Prime Minister's official spokesman said the Chancellor would "strike the right balance" between funding public services and encouraging growth.

But No 10 also warned of "tough but fair" decisions on taxes while insisting action would be taken to keep them low as possible.

The spokesperson said: "I think what we've said is that the choices we’ll take at the Budget will be led by our values and our determination to build a fairer economy that works for working people and rewards working people.

"We will maintain a tight grip on public spending to keep taxes, inflation and interest rates as low as possible.

"We will take the tough but fair choices on tax so everyone, including businesses and the wealthiest, contributes their share to fund our public services."

Meanwhile, the Chancellor's task of balancing the books has become more challenging after a backbench rebellion earlier this year resulted in the Government rowing back on planned welfare cuts of up to £5 billion.

Kemi Badenoch is expected to heighten her attacks over the U-turn in a speech on Tuesday, accusing Labour of having "given up" on lowering the benefits bill.

The Tory leader is expected to say: "Britain has stopped working, because it has stopped making sense to work.

"Far from solving this, Labour seem intent on making it worse."

She will claim the Government's workers' rights bill is "not fit for purpose" adding: "It needs a fundamental rethink and overhaul.

"The only responsible action left for the Government is to shelve it in its entirety and start from scratch.

"So ahead of the budget later this month, Rachel Reeves should demand the Government withdraws the Employment Rights Bill altogether – before it becomes Labour’s Unemployment Act."

Shadow Chancellor Mel Stride said Sir Keir Starmer should sack the Chancellor if she hikes taxes, having said last year she would not be "coming back for more taxes."

"It's taken Rachel Reeves more than a year to admit her first Budget was a failure," he said.

"Now, with an emergency press conference, she is all but confirming what many feared – higher taxes are on the way.

"if Rachel Reeves breaks her promises yet again, Keir Starmer must take responsibility and sack her. The country needs a Chancellor with a plan and a backbone.