Chancellor ditches her no-tax pledge, blaming wars, US tariffs and soaring borrowing costs

Rachel Reeves has confirmed she no longer stands by her promise not to raise taxes, declaring that “the world has changed” and Britain cannot shield itself from global turmoil.

The chancellor made the admission on Monday ahead of her keynote speech to the Labour Party conference in Liverpool. In a round of broadcast interviews, Reeves explained that a combination of conflicts, mounting tariffs from the United States and escalating borrowing costs had forced her to abandon the pledge she made last year.

When addressing the CBI in November 2024, Reeves had assured business leaders that she would not return “with more borrowing or more taxes”. At the time, the remark was widely interpreted as a signal of fiscal restraint rather than a blanket ban on tax increases. But speaking on BBC Radio 4’s Today programme, Reeves said the promise could no longer hold.

“Well, look, I think everyone can see in the last year that the world has changed, and we’re not immune to that change,” she said. “Whether it is wars in Europe and the Middle East, whether it is increased barriers to trade because of tariffs coming from the United States, whether it is the global cost of borrowing, we’re not immune to any of those things.”

Despite the U-turn, Reeves strongly indicated that VAT would not be touched in November’s Budget. She told BBC One’s Breakfast that Labour’s manifesto commitments still stood, stressing they were designed to protect working people who had already borne the brunt of the Conservatives’ economic mismanagement.

“We made a commitment in our manifesto, and those commitments do stand,” she said firmly. When pressed on whether that meant VAT was safe, Reeves responded: “We made those commitments for a reason, and those commitments stand and judge me on my record.”

The chancellor is understood to believe that raising VAT would unfairly hit working households and risk fuelling inflation.

Even so, her refusal to rule out other tax rises leaves Labour with difficult choices as the Budget looms. Economic pressures are mounting, with international instability threatening growth and higher global interest rates making borrowing more expensive.

Reeves also hit back at speculation about her fiscal plans. “There are a lot of people who claim to know what is going to be in my budget. They don’t,” she told Today. “A lot of them are talking rubbish, and frankly, a lot of it is very irresponsible. People were told last year that I was going to do this, I was going to do that, and people made decisions with their money that often were irreversible decisions.”

Beyond the tax row, Reeves also weighed in on immigration. She backed Keir Starmer’s characterisation of Reform UK’s proposal to retrospectively strip large numbers of immigrants of the right to live in Britain as racist. Reeves stressed this was entirely different from removing individuals who had no legal right to remain in the first place.

The remarks underline the political minefield Labour faces. Reeves is trying to project both economic realism and fairness as she prepares her second Budget. Yet, by discarding her previous stance, she risks accusations of betrayal from critics who claim voters were misled.

For Reeves, the calculation is stark: Britain’s finances are tightening, global volatility is rising, and the space for easy political promises has evaporated. Her new message is clear—adapt or be crushed by forces far beyond Westminster’s control.