Chancellor Rachel Reeves

Expected on 26 November, the Chancellor said that the budget will be based on “fairness and opportunity” after “the world has thrown even more challenges in our way” in the last year.

However, in its election manifesto, Labour promised not to raise income tax, VAT or National Insurance, BBC News reports. 

Dan Coatsworth, head of markets at AJ Bell, said: “Rachel Reeves’ unusual stance of giving a big speech on the eve of the Budget has left investors with more questions than answers, and done nothing to remove uncertainty around taxes.

“The bond market would be happy if the chancellor raises taxes as it would help to improve public finances and make the UK less risky from an investment perspective.

“It was telling that the 10-year gilt yield fell as Reeves began her speech, indicating that bond investors thought we’d get confirmation that taxes would go up at the Budget. But as it became clear that Reeves was merely dancing around the topic, yields went back up.

“The chancellor said the speech was about giving context to the challenges facing the government, but she batted away questions about taxes faster than an Olympic table tennis player.

“Many people are fed up with this game. There are growing calls for the chancellor to be crystal clear in her plans and make bolder decisions.

“No-one will be shocked at tax rises and many people believe it is better to sort the situation out once and for all, rather than keep tinkering at the edges. This feels like Reeves’ last chance to fix the house, otherwise her days could be numbered.”

Matthew Amis, investment director, rates management, at Aberdeen Investments, added: “Chancellor Reeves’s speech this morning provided the gilt market with all the right comforting words as we head towards the Autumn Budget. The Chancellor confirmed the fiscal rules are ironclad, that she intends to increase the fiscal headroom and the importance of inflation falling.

“She mentioned re-visiting welfare reform, and while admittedly there were more hints to tax rises than spending cuts, there were some hints to spending cuts nonetheless. Gilts yields fell throughout the speech, but pared gains as it became clear that even though tax hikes seem inevitable, they weren’t going to be announced today.

“The question now is: can she deliver? UK chancellors have talked tough in the past, only to then fail on delivery or U-turn at the last moment. If Chancellor Reeves is as bold as she was this morning at the Autumn Budget, then we believe gilts yields can continue to fall into year-end, outperforming peers.”