Rachel Reeves all but confirms she will break tax pledges but lift two-child cap

The UK is bracing for the next autumn budget within weeks, which could bring a tax hike and scrap the two-child benefit cap.

Rachel Reeves is preparing to announce the autumn budget on November 26, and rumours are swirling over what changes it will bring to people’s purses and the economy.

The Chancellor suggested yesterday she will hike taxes despite Labour’s election manifesto promise not to increase income tax, employees’ national insurance or VAT.

She warned that not increasing taxes for working people could only be met with ‘deep cuts’ to public investment, which could hamper economic growth.

However, she also hinted at being open to abolishing the two-child benefit cap, which campaigners say could lift 350,000 children out of poverty. She said kids ‘should not be penalised because their parents don’t have very much money.’

Reeves also warned that global instability, fuelled by Donald Trump’s tariffs and the ongoing war in Ukraine, and the sudden downgrade of economic forecasts by the UK watchdog, could force her to make difficult choices.

Reeves told BBC Radio 5 Live: ‘I will set out the choices in the Budget.

‘It would, of course be possible to stick with the manifesto commitments, but that would require things like deep cuts in capital spending and the reason why our productivity and our growth has been so poor these last few years is because governments have always taken the easy option to cut investment – in rail and road projects, in energy projects, in digital infrastructure.

‘And as a result, we’ve never managed to get our productivity back to where it was before the financial crisis.

‘So we’ve always got choices to make, and what I promised during the election campaign was to bring stability back to our economy, and what I can promise now is I will always do what I think is right for our country.’

But she cautioned that final decisions ‘haven’t been taken yet.’

She said the downward revision of UK’s productivity by the Office of Budget Responsibility is based on the country’s performance ‘of the last few years under the last government’ to make future forecasts.

Commenting on the controversial two-child benefit cap, the Chancellor said it was crucial not to let the ‘costs to our economy in allowing child poverty to go unchecked.’

She said: ‘Lots and lots of different reasons why families change shape and size over time, and I don’t think that it’s right that a child is penalised because they are in a bigger family through no fault of their own.

‘So, we will take action on child poverty. The last Labour government proudly reduced child poverty and we will reduce child poverty as well.’

The shadow Chancellor, Sir Mel Stride, accused Reeves of ‘trying to pull the wool over your eyes.’

‘Every time the numbers don’t add up, Reeves blames someone else. But this is about choices – and the Chancellor is making all the wrong choices,’ he said.

The two-child benefit cap, which stops parents from claiming child tax credit or universal credit for more than two children, was introduced by the Conservative government in 2017.

Other rumoured tax measures Reeves might be looking at include replacing the stamp duty with a property tax, and a new 3p per mile tax for EVs.

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