UK Chancellor of the Exchequer Rachel Reeves is under pressure to reassure her party and the markets amid strained public finances. With borrowing costs high and a significant gap in public finances, the Chancellor faces tough decisions. Yields on ten-year gilts remain elevated, intensifying pressure on her fiscal strategy. deVere Group chief executive Nigel Green warns that Reeves has limited room to manoeuvre, given the current economic and political climate. De Vere Group is one of the world’s leading independent financial advisory organisations, providing wealth management solutions to international investors. The firm has more than $12 billion under advisement.
Growing internal dissent within the Labour Party, coupled with the rise of Reform UK in the polls, further complicates Reeves’ position. An attempt to alter winter fuel payments and a tax-heavy budget have weakened her standing. Nigel Farage’s Reform UK is capitalising on voter discontent, potentially topping the polls if an election were held now. Green anticipates the November Budget will likely include heavier tax measures. He advises investors to take the risk of broad-based tax increases seriously, saying the Treasury will seek revenue wherever possible.
The Chancellor has not ruled out extending the freeze on income tax thresholds, a move that could generate billions in additional revenue. This measure, scheduled to last until 2028, effectively pulls more households into higher tax brackets as wages increase. Green highlights the danger of threshold creep, describing it as a silent tax rise. He adds that any hesitation from the government could trigger a negative reaction from the bond market, cautioning against a repeat of the financial turmoil seen in 2022.
Green urges individuals and companies to review their wealth structures and international planning in advance of the Budget speech. He expects the focus on November 26 will be about revenue generation, despite any narratives of fairness or growth. He concludes that tax rises are likely, and prudent savers and investors should act proactively to protect their wealth. Reeves’ ability to balance market demands with her party’s expectations will be tested, with the potential for more drastic measures if she fails to satisfy both.
