Will Chancellor gamble at the Autumn Budget?

Although Parliament is on its summer recess speculation about what will be in this Autumn’s Budget is already in full swing. No date has been set for Chancellor Rachel Reeves’s second Budget but with economic and fiscal data continuing to mount up interest is growing in what will be announced. In this blog we take a look at the early indicators for the Autumn Budget 2026.

Rolling the pitch

According to newspaper reports, the Chancellor and Prime Minister Keir Starmer will shortly start ‘rolling the pitch’ in preparation for tax rises and economic reforms.

The government has been forced into action by an underperforming economy and some grim forecasts for the public finances.

Ms Reeves and Mr Starmer are understood to have agreed some broad principles for the Budget and the Treasury will begin to submit ideas to Downing Street towards the end of the month.

Taking the gamble

The Chancellor has previously pledged not to raise personal taxes – including Income Tax, employee National Insurance contributions (NICs) or VAT – and Treasury sources have told the press that this is still the case.

This will leave the Chancellor looking for other targets and the highly profitable gambling industry appears certain to see changes to its levies, despite lobbying by the industry.

Former Prime Minister Gordon Brown has been advocating for such a rise and says the funds could be used to scrap the two-child limit on welfare payments.

Limited options

The government’s limited options were underlined this week following a report from the National Institute of Economic and Social Research (NIESR) think tank.

It said ‘moderate but sustained’ tax rises would be needed in the Budget for Reeves to overcome a deficit of £41.2 billion and restore the £10 billion buffer the Chancellor has pledged to maintain.

NIESR, which is non-political, suggested the government could raise revenue through changes to the scope of VAT, pensions allowances and prolonging the freeze in Income Tax thresholds, which is set to end in 2028.

Fiscal rules

Reeves has set out two rules for government borrowing. The first rule was that day-to-day spending would be paid for with government revenue. Borrowing can only be for investment.

The second rule was that debt must be falling as a share of national income by the end of a five-year period.

According to NIESR, the Chancellor now faces a ‘trilemma’ over which of her pledges to fulfil meeting her spending commitments, her manifesto promises to avoid tax rises on working people, or meeting the limits she has set on borrowing.

Rates higher for longer

The pressure facing the government was stressed once more when the Bank of England warned that it could be forced to keep interest rates at higher levels for longer due to the danger of inflation rising to 4% this year.

The central bank cut interest rates to their lowest level in two years but warned Britain was facing a toxic cocktail of sluggish growth, rising unemployment and stubbornly high inflation. November date?

No date has been set for the Budget, which was held last year on 30 October. The Chancellor is expected to give the Office for Budget Responsibility 10 weeks’ notice to prepare its forecast so November is beginning to look more likely this year.

That would give the government more to time to roll the pitch for tax increases as well as hoping for better economic growth news in the interim.

The Autumn Budget

When the Chancellor delivers the Autumn Budget to Parliament, Mercia’s tax experts will be watching and will provide detailed analysis of the day’s announcements.

Whatever changes are made we will help you keep your clients up to date.