UK Markets Fall as Chancellor Reeves Signals Possible Budget Tax Rises

UK Chancellor Rachel Reeves has signaled potential tax increases in the upcoming November 26 Budget, despite Labour's manifesto pledge not to raise income tax, VAT, or national insurance. Reeves emphasized the necessity of making "hard choices" given economic challenges such as tariffs, inflation, and rising government borrowing costs, stating she must face reality rather than ideals. Her statements sparked a sell-off in UK equities, with the FTSE 100 and FTSE 250 indices falling and sterling hitting a seven-month low against the US dollar. Analysts warn that tax hikes could reduce household spending and economic growth, potentially leading the Bank of England to cut interest rates to support the economy. The Chancellor is reportedly considering raising income tax by 2p, which would be the first increase in the basic rate in 50 years, alongside extending the freeze on tax thresholds. Market responses indicate investor concern over the UK's economic outlook and fiscal policy direction.