Rachel Reeves is the chancellor of the exchequer in Keir Starmer's Labour government in Britain. She was born in London. Before entering government, as chair of Parliament's business committee, she harangued Deliveroo's boss over how much tax the firm saved by not treating its riders as employees.
On November 4th 2025 Ms Reeves reversed course, hinting in a speech from Downing Street that broad-based tax rises, most likely an increase in income tax, were coming ahead of her budget on November 26th. "If we are to build the future of Britain together, we will all have to contribute," she said. "Each of us must do our bit." The shift reflects the tightness of Britain's fiscal constraints: under the previous Conservative government, the share of income tax paid by the top 1% of earners rose from 25% to 29%, even while their share of income remained flat at 13%, leaving little room to squeeze the rich further. Ms Reeves had previously ruled out increases to the broadest taxes—income tax and VAT—focusing instead on steep rises to less lucrative ones. An inheritance tax on farms raises barely £2bn but provoked tractors turning up in Whitehall. She reduced disability benefits by £5bn in the spring of 2025.
Labour's manifesto explicitly ruled out increasing Britain's top three revenue-raisers: income tax, national insurance and VAT. These taxes together comprise 74% of the total tax take. In her first budget she left a fiscal buffer of just £9.9bn (0.3% of GDP) for meeting her rule that tax revenues must match day-to-day spending in 2029-30—less than half the average between 2010 and 2022. The buffer has since vanished, turning into a hefty shortfall. Capital Economics, a consultancy, estimates the government needs to find £29bn in tax rises or spending cuts simply to restore its previous headroom. Government spending rose from 40% of GDP before the covid-19 pandemic to 45% in 2025-26; tax rose from 33% to 37% of GDP, the highest level since the 1940s. Britain's "labour tax wedge"—the share of total labour costs paid in tax—was 29.4% in 2024 for a single average earner without children, the lowest in the G7; it rose to 31.4% after the employers' national-insurance rise but remains well below the G7 average. Pensioners pay no national insurance, while the self-employed enjoy lower rates. The top 10% of earners now contribute about 59% of income tax, up from 50% a quarter-century ago.
She scrapped the universal winter-fuel allowance to save £1.1bn a year (0.04% of GDP), then reversed course after a backlash, restoring it for all but the richest pensioners. She paused a slew of planned infrastructure projects on arriving in office in July 2024, declaring "if we cannot afford it, we cannot do it", then gave them the green light almost a year later—a delay critics say wasted time the government cannot afford.
In January 2026 the government performed another U-turn, this time over business rates for pubs. Ms Reeves had announced in November 2025 the phasing-out of generous tax relief for pubs introduced during the covid-19 pandemic, which would have raised the average pub's annual tax liability from £10,600 to £15,000 over three years. The backlash was formidable: some pubs erected signs banning Labour MPs, and a survey by the British Institute of Innkeeping found that just one in ten pubs would be profitable if the rise went ahead. Peter Kyle, the business secretary, said the government was in "listening mode". Business rates contribute £28bn ($38bn) to government coffers annually, equivalent to 2.2% of Britain's tax receipts—a higher share than in the average rich country.
In January 2025 Ms Reeves visited Beijing but secured a paltry £600m in Chinese investment.
Ms Reeves set economic growth atop Labour's list of "missions", maintaining that Britain's main problems are on the supply side. She raised employers' national-insurance contributions in October 2024—a tax on payroll costs that angered businesses. According to the Institute for Chartered Accountants, business confidence turned negative in the first quarter of 2025 for the first time in 30 months. A workers' rights bill added to corporate grievances. Matthew Pennycook, the housing minister, has said the "major planks" of planning reform will be finalised by the end of 2025.
On June 11th 2025 Ms Reeves delivered Britain's spending review. The NHS was the biggest winner, with day-to-day health and social-care spending rising 2.7% per year in real terms over three years; NHS spending has reached 8% of GDP, up from 4% in the 1990s. Defence capital spending rises to 2.6% of GDP by 2027, with 3% as a medium-term goal. The Home Office was the clearest loser, with day-to-day spending falling 1.7% in real terms, banking on the closure of asylum-seeker hotels. The review allocated £14bn over five years for Sizewell C, a new nuclear power plant due in 2033. Ms Reeves also announced upgrades to the Leeds–Manchester railway and a new local growth fund for regions outside the south-east, echoing the Conservatives' "levelling up" project. The overall forecasts were finalised before Donald Trump's "Liberation Day" tariffs.
Her fiscal rules require day-to-day spending to be covered, but a £5bn hole that appeared in the Treasury's spreadsheet forced her to find cuts to disability benefits. Labour's fiscal rules are meant to guarantee stable policymaking but have instead produced recurring drama, with officials amending spending to hit a forecast—and almost certainly wrong—number four years hence.
On July 2nd 2025, the day after Labour MPs gutted the welfare bill she had championed, Ms Reeves wept in Parliament as yields on Britain's debt soared. Her credibility with investors appeared badly damaged. Keir Starmer was forced to confirm publicly that she was secure in her job to reassure investors.
Ms Reeves has urged builders to "stop worrying about the bats and the newts". A planning bill working its way through Parliament in 2025 will weaken legal protections for wildlife habitat, making it easier for developers to demolish habitat in one place provided they pay into a fund that enhances it somewhere else.
Annual rates of return on ten-year gilts reached 4.8% in September 2025, giving Britain the highest yields across the G7. Debt-interest payments have more than doubled in five years; in 2025–26 the Treasury will spend £111bn ($150bn) on interest—more than the education budget. Ms Reeves has promised to reduce the deficit from 4.8% of GDP to 2.1% by 2029–30, yet her plans rely on assumptions—ditched welfare cuts, low borrowing costs and optimistic productivity gains—that most consider unrealistic. Capital Economics, a consultancy, estimates a shortfall as high as £28bn, which would mean higher taxes or spending cuts. France would be protected from a global bond crisis by the ECB, America by the dollar's reserve-currency status; Britain would be alone.
On November 26th 2025 Ms Reeves delivered her second budget. The OBR gave a sunnier-than-expected outlook, largely because inflation is now expected to be higher and more growth is to come from real wages rather than profits—taxed more heavily, this delivered a bigger-than-expected revenue boost.
The budget contained £26bn in tax increases in 2029-30 and £11bn in extra spending. The biggest tax rise was freezing the thresholds at which different rates of income tax kick in, raising £12.7bn in 2030-31, with the burden falling mostly on lower and middle incomes. A new limit on pension contributions via salary-sacrifice schemes will make national insurance payable on contributions over £2,000 per person, raising £2.6bn in 2030-31.
The biggest spending measure was the abolition of the two-child limit on means-tested welfare payments, costing £3bn a year—a measure that had kept 300,000 children in poverty. Ms Reeves also spent £7bn in 2029-30 reversing her previous attempts to ration disability benefits and winter-fuel payments. She doubled headroom against her stability rule from £9.9bn to £21.7bn, though the OBR reckoned she had only a 59% chance of meeting it. Officials gauge the probability of meeting one of her debt targets as just 52%. A mansion tax became government policy.
Total spending is forecast at 44.3% of GDP in 2029-30, five percentage points higher than before the pandemic. Taxes will reach 38.2% of GDP, the highest since the 1940s. The OBR cut its projection for average real GDP growth in 2026-29 from 1.8% to 1.5%.
From 2028 drivers of electric vehicles will be subject to road pricing: a levy of three pence per mile for fully electric cars and half that for plug-in hybrids, expected to raise £1.9bn by the end of the decade. Forecourt taxes raised £24.4bn in 2024-25; the OBR expects revenues to collapse from 0.7% of GDP to just 0.1% by 2050-51 as petrol vehicles disappear. The new scheme fills about a quarter of that shortfall. Drivers will pay for an estimated year's driving up front and settle the balance at the end of the year, with mileage checked against MOT records, as in New Zealand. The OBR reckons the levy will result in 440,000 fewer EV sales over five years, mostly offset by more generous purchase incentives.
In her budget speech Ms Reeves blamed the previous Conservative government 28 times—even more than the 20 instances in her maiden budget in October 2024, which was already more than any chancellor in 50 years of budget speeches. She also implied that Nigel Farage, leader of Reform UK, was a "Russian asset".
On March 17th 2026, in the annual Mais lecture at Bayes Business School in London, Ms Reeves called time on the era of a globetrotting post-Brexit Britain that could do without Europe. "I have today fired the starting gun of where we want to go next, and that is closer alignment," she told The Economist. She cited a study suggesting the hit to GDP from Brexit may be as high as 8%. The government's negotiating ask now aspires to reach beyond energy and food to include more areas of the single market; alignment with EU law should be the norm and divergence the exception, in Ms Reeves's formulation. On March 18th she made her case at a meeting in Madrid with Carlos Cuerpo, the Spanish economy minister.
Labour remains opposed to rejoining the single market in toto, or forming a new customs union with the bloc. It still opposes free movement of people and will not countenance a referendum to rejoin. According to YouGov, Britons would vote to rejoin the EU by a margin of 52% to 29%. Labour is bleeding votes to the progressive Greens and Liberal Democrats, making Europe a political lifeboat rather than a drag.
Ms Reeves championed a third runway at Heathrow Airport as her totemic infrastructure project—the "pudding" to go with the "spinach" of tax rises, much as George Osborne had championed HS2 in the 2010s.
Ms Reeves justified another jump in the national minimum wage—already among the highest in the world—by pointing to the cost of living. "It is still the number-one issue for working people," she said. The government pledges a lower cost of living while making it costlier for businesses to hire: employers have endured a big increase in national insurance, with supermarkets employing part-time workers hit hardest.
The Office for Budget Responsibility published its annual fiscal sustainability report on July 8th 2025, calling fiscal risks "daunting." It projected that by the 2070s annual borrowing may rise to 20% of GDP and the debt ratio to 270% if current policies stay in place. Britain's deficit exceeds 5% of GDP and its debt ratio is close to 100%. The state-pension bill, currently about 5% of GDP, is projected to reach 7.7% by the early 2070s, driven by ageing and the triple lock.
Ms Reeves delivered an economic update on March 3rd 2026 that was notable for its dullness—she walked the Commons through the OBR's latest forecasts without announcing a single major policy decision. The restraint was mostly welcome: her tenure had been plagued by feverish conjecture about tax changes, causing businesses to defer investment.
The OBR downgraded its 2026 growth forecast from 1.4% to 1.1%. The war in and around Iran had led to gilt yields spiking, reflecting rising oil and gas prices. The Treasury and the Ministry of Defence were locked in a battle over defence spending: securocrats want to bring forward Labour's promise to raise spending to 3% of GDP from the next parliament to the current one, at an extra cost of £14bn ($19bn) a year by the end of the decade.
The only thing that experience teaches us is that experience teaches us nothing.