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Rachel Reeves is set to announce a suite of planning reforms and tax hikes in her inaugural comprehensive Budget on 26 November, as the Chancellor grapples with the formidable challenge of addressing a £30 billion deficit in the public finances.
The Treasury is reported to be considering a variety of initiatives to stimulate growth while increasing revenue, including reinstating the bank surcharge to 8 percent—a measure anticipated to yield approximately £2 billion annually. The tax, levied on bank profits in addition to corporation tax, was reduced to 3 percent by the previous Conservative administration in 2023 to safeguard the City’s competitiveness.
The Office for Budget Responsibility (OBR) is anticipated to evaluate the suggested planning reform as a potential long-term enhancement to growth, possibly contributing £3 billion to the economy. This would slightly alleviate pressure on Reeves to implement additional tax hikes, although officials acknowledge that extra revenue-generating strategies are unavoidable given the magnitude of the deficit.
Central to the Chancellor’s growth agenda are proposals to revamp what she has described as Britain’s “antiquated” planning system. Reeves and Housing Secretary Steve Reed are advocating for revisions to the Planning and Infrastructure Bill that would streamline approvals for low-impact projects and limit the utilization of judicial reviews that can postpone significant undertakings.
According to information from The Guardian, the suggestions could prevent judges from overturning approvals while legal disputes are pending and restrict repetitive reviews of the same initiative. Nevertheless, such modifications may complicate the Bill’s progress through the House of Lords, where peers might resist limiting environmental protections.
A government representative stated that the reforms were essential to “construct the 1.5 million homes diligent individuals require” and expedite major projects like the Lower Thames Crossing.
Treasury considers VAT expansion and bank surcharge increase
The Treasury is also assessing methods to broaden the VAT base, although no determination has been made regarding raising the standard rate. Reports suggest that proposals include extending VAT to currently excluded sectors such as private transport and various services. Health Secretary Wes Streeting has dismissed subjecting VAT to private healthcare, but officials have not ruled out other expansions.
There has been increasing pressure from trade unions to focus on the banking sector. The Trades Union Congress (TUC) has urged Reeves to reverse the Conservative-era reduction to the bank surcharge, estimating that this change could generate £8 billion over four years.
However, the sector has cautioned against further taxation. UK Finance chief executive David Postings warned that additional levies could jeopardize growth, stating that “initiatives to stimulate the UK economy… would not align with further tax increases on the sector.”
The opposition has capitalized on reports of new tax measures. Shadow Chancellor Sir Mel Stride remarked at the Conservative conference that “additional tax hikes are forthcoming” under Labour, accusing Reeves of having “created a significant deficit in the public finances.”
He added: “Under Labour, nothing is safe from the taxman—not your employment, not your residence, not your enterprise, not even what you intend to pass on to your descendants.”
Reeves, addressing Labour’s conference in Liverpool last week, acknowledged that “difficult decisions” were on the horizon but claimed she would keep taxes “as minimal as feasible” amid global economic challenges.
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