UK borrowing costs fall as Rachel Reeves pledges ‘iron clad’ commitment to fiscal rules in the budget – business live

8.57am GMT
Quilter: Reeves prepared the ground for higher personal taxes

Rachel Reeves’s pre-Budget speech this morning was all about preparing the ground for some painful measures later this month, says Rachael Griffin, tax and financial planning expert at Quilter:

She knows this Budget will define her credibility, and her message today was clear that Britain’s finances are in a worse state than many realise, and everyone will be expected to play their part in putting them back on track.
Reeves was at pains to distance herself from the politics of austerity, arguing that deep cuts and short-term fixes are what weakened the country’s economic foundations in the first place. But while her argument against renewed austerity will appeal to many scarred by the last decade, it also lays the groundwork for a different kind of pain, which is higher personal taxes to rebuild public finances. She’s made it clear she is happy to be unpopular if it helps secure public finances.
Her insistence that ‘easy answers’ are off the table is a warning that there will be few giveaways in this Budget. The Chancellor is trying to convince both markets and the public that fiscal discipline can coexist with fairness, but for households already facing high borrowing costs and squeezed budgets, the idea of contributing more will still be a tough sell.
This was a speech designed to project authority and honesty, not to win popularity. The real challenge for Reeves will come when she has to translate that rhetoric into decisions that feel credible to investors but also tolerable for working families.

8.53am GMT

The pound has dipped against the US dollar, losing more than a third of a cent to $1.3094.
That matches the six-month low touched last Friday.
Sterling has weakened in recent days as City investors have begun to predict faster cuts in UK interest rates.
A rate cut at Thursday’s Bank of England meeting is now seen as a 35% possibility, up from 30% at the end of last week.

8.43am GMT
Reeves refuses to say she'll stick to manifesto pledges on tax

Rachel Reeves has failed to say she’ll stick to the government’s manifesto pledges on tax.
Asked if she will stick to Labour’s manifesto promise not to raise the taxes that working people pay, the chancellor replied:

I will set out the individual policies of the budget until the 26th of November. That’s not what today is about. Today is about setting the context up for that budget.
And your viewers can see the challenges that we face, the challenges that are on a global nature. And they can also see the challenges in the long-term performance of our economy. And the Office for Budget Responsibility will set all that out. They’ve done the review of the supply side of the economy that looks at the past, but they use the past to predict the future.
As chancellor, I have to face the world as it is, not the world that I want it to be.
And when challenges come our way, the only question is the how to respond to them, not whether to respond, or not.
And as I respond on the budget 26 November, my focus will be on getting NHS waiting lists down, getting the cost of living down and also getting the national debt down.

Related: Reeves refuses to say she will stick to manifesto pledge on tax rises and insists she must face world ‘as it is’ – UK politics live

8.41am GMT

Reeves is taking questions from the press pack now, pledging to be honest with people, and put the national interest first.
She says the focus on the budget is on “getting the debt down, getting NHS waiting lists down and getting the cost of living down.”

8.41am GMT

The message from Rachel Reeves today is that “Each of us must do our bit”.
She hasn’t explicitly said that she plans to raise taxes later this month (but she’s also not denied it!), saying:

If we are to build the future of Britain together, we will all have to contribute to that effort.
Each of us must do our bit, for the security of our country and the brightness of its future.

'Each of us must do our bit'Chancellor Rachel Reeves warned she will make 'necessary choices' as she delivered a pre-Budget speech in Downing Street, amid speculation of tax rises and spending cutshttps://t.co/GJ0dGG8K5D pic.twitter.com/VDKpRSeZJg— BBC Breakfast (@BBCBreakfast) November 4, 2025

8.35am GMT

Rachel Reeves wound up her speech by promising to do what is right, not what is popular.
She pledges the budget on 26 November will be a budget for growth that supports businesses to innovate.
And she promises to do “what is necessary to protect families” as she takes decision on tax and spending.

8.28am GMT
UK borrowing costs drop as Reeves speaks

The cost of UK borrowing is falling as Rachel Reeves outlines her priorities for this month’s budget.
The chancelllor’s promise that she has an ‘iron clad’ commitment to her fiscal rules is probably reassuring bond investors.
The yield, or interest rate, in UK 10-year bonds has dropped by 4.5 basis points (0.045 percentage points) to 4.39% this morning (from 4.43% last night).
The yield on 30-year bonds has dropped by 5 basis points, to 5.166%.
Those are relatively small moves, but certainly moving the way the Treasury would like to see.
UPDATE: Victoria Scholar, head of investment at interactive investor, says:

In an unusual address ahead of this month’s Autumn Budget, Chancellor Rachel Reeves tried to prepare voters for tax cuts by laying out the UK’s economic challenges.
She talked about how Tory-era austerity hurt years of capital investment and how productivity performance is weaker than previously estimated.
She said inflation is still too high and interest rates are still a constraint and government borrowing costs have increased. Reeves also said her commitment to the fiscal rules is iron clad, pushing 10-year and 30-year bond yields lower.

Updated at 8.46am GMT

8.24am GMT
Reeves promises 'iron clad' commitment to fiscal rules

Rachel Reeves then insists that her commitment to her fiscal rules is “iron clad” – a signal to the financial markets that she will not sign off a debt splurge in this month’s Budget.
She explains that £1 in every £10 of government spending goes on servicing the national debt.
And she argues against calls for more borrowing, pointing out that there is a limit that banks and pension funds will pay for UK debt.
She says:

“The more we try to sell, the more it will cost us.”

Reeves also pledges not to repeat the mistakes of the “cycle of austerity and decline” which has led the UK to its current situation.

8.20am GMT

Although interest rates have been cut five times this parliament (from 5.25% to 4%) they are still a constraint on the economy, Reeves says.
[The Bank of England is due to set rates again on Thursday].

8.18am GMT

In another criticism of previous governments, Rachel Reeves warns that years after austerity has led to capital investment being sacrificed.

8.17am GMT

Reeves then warns that it is clear that the UK’s productivity performance is weaker than previously thought.
She says she won’t preempt the conclusions of the Office for Budget Responsibility’s assessment of UK productivity (reminder, there is speculation the OBR could lower its estimate of trend productivity growth by 0.3%).

8.15am GMT
Reeves: World has thrown more challenges our way

Chancellor Rachel Reeves warns that years of “economic mismanagement” has limited the UK’s potential, leaaving to unrealised potential.
She adds that the world has thrown “more challenges our way” since her first budget a year ago.
She cites three factors:

tariffs which have dragged on global confidence, dampening growth
inflation has been too slow to come down, with supply chains remaining volatile
the cost of government borrowing has increased around the world – something the UK has been particularly vulnerable to

8.12am GMT

Rachel Reeves begins her speech by saying she will make the choices necessary to deliver strong foundations for this economy.
She says her budget later this month will focus on protecting the NHS, reducing the national debt and improving the cost of living.

8.10am GMT
Watch Rachel Reeves's speech here:

Rachel Reeves has just arrived to give her much-anticipated speech – you can watch it live here:

8.09am GMT

Stocks have dropped at the start of trading in London, although Rachel Reeves isn’t to blame.
The FTSE 100 index of blue-chip shares has dropped by 70 points, or almost 0.75%, to 9628 points.
It’s part of a wider sell-off in global financial markets, in what looks like a risk-off mood among investors.
Mining companies are leading the fallers in London, with copper producer Antofagasta down 3.3%.

8.08am GMT
Reeves: Today I will set out the choices our country faces

Rachel Reeves has just posted on X that she will “set out the choices” the UK faces.
The chancellor wrote:

The Budget this month will focus squarely on the priorities of the British people: cutting waiting lists, cutting the national debt and cutting the cost of living. Today I will set out the choices our country faces and the values that will guide my decisions.

7.55am GMT
UK Politics Live: Reeves to roll pitch for budget tax rises

There’s obviously huge interest in Westminster, as well as in the financial markets, in Rachel Reeves’s speech – due to start at 8.10am GMT.
My colleague Andrew Sparrow will be tracking events here.

Related: Rachel Reeves to give speech preparing ground for budget tax rises – UK politics live

He writes:

David Cameron is credited with popularising the term “pitch rolling” in Westminster, to describe the process whereby politicians prepare the public for difficult announcements by shaping the argument in advance. It is a metaphor with connotations of a gentle game of cricket, and pleasant summer afternoons.
Today Rachel Reeves is engaged in a classic piece of “pitch rolling”. But her task is more daunting. She won’t be flattening the odd bump; she has to shift some colossal PR obstacles, which is more a task for a fleet of JCB diggers.
That is because, when she delivers the budget three weeks tomorrow, she will have to fill fiscal gap reportedly as high as £30bn. That means tax rises, which are never an easy sell. But it also means going back on the promise she made to the CBI last year when she said she would not need to raise taxes again on the scale she did in autumn 2024. And there seems to be a very real chance that she will also decide to raise income tax, which would be a direct breach of a promise Labour made in its election manifesto.

7.39am GMT
Goldman Sachs also expect tax rises

Analysts at Goldman Sachs have predicted that Rachel Reeves’s budget could push down government borrowing costs, if she reassures the bond markets that she’s committed to tackling the deficit.
In a research note released to clients last Friday, Goldman Sachs predict that the chancellor’s budget measures – and pre-budget hints about what’s to come – could knock up to 0.2 percentage points off the cost of borrowing (the ‘yield’ on a 10-year bond) for a decade.
They explain:

Given the modest downside impact on growth and inflation, plus the potential for increased credibility in the deficit path, we expect the budget measures to lower 10y Gilt yields by around 10-20bp, although given budget expectations are already forming we see this as a tailwind for Gilts into the budget more than the on-the-day reaction.

Goldman Sachs also point out that UK bond yields remain the highest in the G10.
They also expect tax rises in the budget, saying:

The upcoming budget is set to tighten fiscal policy by around £30bn, which our economists expect will mainly comprise tax increases, including freezing income tax thresholds from 2028, broadening the NI [national insurance] tax base, pensions and property taxes.
We expect limited spending cuts, but that the budget delivers a modest increase in headroom at the end of the forecast horizon.

7.31am GMT
Tax rises at Budget ‘inevitable’, thinktank warns

This month’s UK budget will include significant spending cuts and tax rises to tackle “a significant deterioration in the public finances”, thinktank the Resolution Foundation has predicted.
In a new report issued this morning, the Resolution Foundation predicts that Rachel Reeves’s fiscal headroom (the £10bn margin to keep within her fiscal rules) will have been more than wiped out by changes in the economic outlook, and government u-turns since March.
That will create “a bleak picture for the public finances”, they say, as the independent Office for Budget Responsibility is expected to downgrade the UK’s ‘trend’ productivity growth by 0.3 percentage points, creating a £20bn shortfall.
That downgrade will be partially cushioned by other changes, including stronger than forecast wage growth.
The think tank says:

The upcoming Budget is a make-or-break moment for the Government. It seems clear that this month’s fiscal event will include significant spending cuts and tax rises spurred by a significant deterioration in the public finances.

The Resolution Foundation urge Reeves to take steps to increase her headroom, to as much as £20bn, to send a clear message to markets that she is serious about fixing the public finances.
They have calculated that doubling the fiscal headroom to £20bn and allowing for cost of living support would require £31bn of fiscal consolidation. And with limited scope for spending cuts, tax rises of £26bn are therefore likely to be needed.
Avoiding touching the three big taxes – VAT, Income Tax and National Insurance (NI) – “risks doing more harm than good”, they argue (even though Labour promised in their manifesto not to raise them).
Resolution also argue that the chancellor could offset a 2p rise in Income Tax with a 2p cut in employee National Insurance, raising £6bn while protecting workers from these tax rises.
Their report concludes:

So, although tax rises are inevitable, there is a way to do them which comes with a boost confidence in the economy and the public finances, while also reducing child poverty and the cost of living.

James Smith, research director at the Resolution Foundation, said:

“The Chancellor should look to make sensible tax reforms to car taxes, dividends and capital gains. Switching 2p of employee National Insurance onto Income Tax would raise £6 billion while protecting workers’ wages

Updated at 7.48am GMT

7.30am GMT
Introduction: Reeves to lay groundwork for budget tax rises

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
With just over three weeks until the UK budget, speculation is mounting that Rachel Reeves will rip up the government’s manifesto promises and raise income taxes.
The chancellor will deliver a speech this morning which is widely expected to pave the way for a tax-raising budget on 26 November.
Downing Street says Reeves will lay out the economic choices she will take at the Budget later this month to cut hospital waiting lists, cut the national debt and cut the cost of living.
The Chancellor is expected to say she will take the necessary choices to deliver “strong foundations”, and explain:

“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:
“Protecting our NHS, reducing our national debt and improving the cost of living.

Reeves faces a choice between tax rises, spending cuts, or breaking her fiscal rules through higher borrowing because of a black hole in the budget – partly caused by a productivity downgrade would leave her with a £20bn gap to fill.
Last night, Keir Starmer told MPs the government would take “tough but fair decisions”, promising a “Labour budget built on Labour values” that would protect the NHS, reduce debt and ease the cost of living.

Related: Reeves to lay groundwork for tax rises in ‘candid’ speech about budget

Mujtaba Rahman, managing director for Europe at consultancy Eurasia Group, says Reeves faces “an agonising choice” on whether to prioritise politics or economics.
He told clients:

The economics increasingly points to what Whitehall insiders are calling a “go big” strategy: another large tax hike, including on income tax, to close a gap of about £30bn to meet Reeves’s goal of balancing government spending and revenue by 2029-2030; however, abandoning the Labour manifesto promise not to raise income tax would leave the party wide open to Tory and Reform attacks.

Yesterday, Reform UK leader Nigel Farage rowed back on his party’s previous promise to deliver tax cuts, arguing it wasn’t realistic in the current economic climate.

Related: What would UK economic policy look like under Nigel Farage’s Reform?

The agenda

8.10am GMT: Chancellor Rachel Reeves to deliver speech in Downing Street
10am GMT: House of Lords committee inquiry on regulators and economic growth
10am GMT: FCA CEO Nikhil Rathi speech at Fair4All Finance event on ‘delivering financial inclusion together”
2:15pm GMT: Treasury Committee hearing on AI in financial services with new City minister Lucy Rigby