Chancellor Rachel Reeves has sharply criticised recent leaks surrounding the upcoming Autumn Budget, calling them “not acceptable.” The leak occurred after a report released last week highlighted that Reeves had decided not to increase income tax, leading to a decline in bond prices.
As recently reported by Cryptopolitan, Reeves abandoned a previously signalled increase in both the basic and higher rates of income tax. The reversal came weeks after she hinted that rates might rise, a move that would have breached Labour’s 2024 manifesto pledge.
The U-turn deeply shook financial markets almost immediately. UK government bond yields climbed sharply, and investors sounded an alarm about the abrupt turn in fiscal policy. The decision leaves a £30 billion shortfall, the economists say, creating serious doubts about how Reeves intends to close the gap without using the sort of growth-sapping measures.
Investors noted the impact of conflicting messages about the budget on the government
During an interview, reporters asked Reeves to comment on her decision regarding income tax. The Chancellor of the Exchequer said, “Leaks are not acceptable… The main goals of this budget will focus on addressing the cost of living, reducing NHS waiting lists, and lowering the national debt.” The government later confirmed her statement.
Concerning income tax, reports from reliable sources indicated that Reeves had hinted at a possible rise in income tax earlier this month during a rare pre-budget speech.
While delivering her speech, she acknowledged that everyone needs to do their part, which, according to her argument, would contradict the Labour Party’s pledge for the 2024 elections.
Her remarks ignited concerns among investors, who worried that the shift in direction would damage the government’s credibility, leading them to conclude that the conflicting messages about the budget were harming the government’s credibility.
UK stocks drop amid the withdrawal of plans to increase income tax
UK stocks drastically dropped on Friday, November 14, as gilt yields surged following the release of reports that the British government had decided to withdraw plans to increase income tax in its upcoming budget. Even with these challenges in place, the markets still managed to increase slightly over the week.
On the other hand, the blue-chip FTSE 100 declined by 1.1%, marking a significant single-day drop since April 9, when the global market responded swiftly to US President Donald Trump’s tariff announcements. However, despite this drop, it was discovered that the week ended with a 0.2% increase.
For the FTSE 250, the stock market index declined by 0.8% but managed to end the week with a slight gain of 0.2%. Notably, this index focuses primarily on domestic firms.
Meanwhile, after the release of reports that the British government has decided to withdraw plans to increase income tax, a government source mentioned that Reeves chose not to increase income tax in this month’s budget. This announcement shocked investors as they anticipated tax hikes to help fill a predicted budget gap.
Markets reacted quickly, and prices tumbled immediately after the announcement. These markets only partially recovered when other news outlets reported improved financial forecasts, which influenced this decision.
Equity losses were widespread, particularly among major banking stocks, which declined by 2.2%. Precious metal mining stocks also declined by 2.4% due to a fall in gold prices.
Global market sentiment turned negative after comments from US Federal Reserve officials raised concerns about a potential rate cut in December. Additionally, uncertainty surrounding US economic data and worries about an AI bubble heightened investor fears.
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This articles is written by : Nermeen Nabil Khear Abdelmalak
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