Chancellors Scene Setter speech ahead of Budget 2025
Chancellor of the Exchequer Rachel Reeves delivered her scene setter speech on Tuesday 4 November 2025.
Later this month, I will deliver my second Budget as Chancellor of the Exchequer.
At that Budget, I will make the choices necessary to deliver strong foundations for our economy.
My Budget led by this government’s values of fairness and opportunity…
…and focused entirely on the priorities of the British people:
Protecting our NHS,
reducing our national debt,
and improving the cost of living.
There is a lot of speculation about the choices that I will make.
I understand that – these are the important choices that will shape the future of our country for years to come
I want people to understand the circumstances we are facing,
the principles guiding my choices,
and why I believe they will be the right choices for our country.
We are a country with considerable economic strengths:
An open, trading economy,
A global hub for cutting-edge industries from AI to Biotech,
With world-leading universities and scientific institutions,
and a talented and a committed workforce.
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At the Budget last year, I fixed the foundations:
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I put the public finances back on a firm footing,
Provided an urgent cash injection into our faltering public services,
And began rebuilding our economy.
But since that Budget,
The world has thrown even more challenges our way.
The continual threat of tariffs has dragged on global confidence -
Deterring business investment, and dampening growth.
Inflation has been too slow to come down as supply chains continue to be volatile -
Meaning that the cost of everyday essentials remains too high.
And the cost of government borrowing has increased around the world -
A shift that Britain – [political redaction] – has been particularly exposed to.
And in an uncertain world, we also face pressure to increase our defence spending – and it is right that we do that…
…protecting ourselves from hostile actors and supporting our allies.
And there are other pressures on the public finances.
The Prime Minister, the Secretary of Work and Pensions and this whole government are committed to reforming our welfare state…
…so that it is not a system that counts the cost of failure…
…but one that invests in success and protects those who need it most.
There is nothing progressive about refusing to reform a system that is leaving one in eight young people out of education or employment.
So, we have begun the job of creating a system that protects people who cannot work and empowers those who can.
And there are longer-term challenges too:
That feeling, shared by millions of people across the country that the economy isn’t working as it should.
Alongside the Budget this month,
The Office for Budget Responsibility – the UK’s public finance watchdog - will set out the conclusions of their review of the supply side of the UK economy.
I will not pre-empt those conclusions…
…but it is already clear that the productivity performance [political redaction] is weaker than previously thought.
A less productive economy is one that produces less output per hour worked.
That has consequences for working people – for their jobs and for their wages…
…and it has consequences for the public finances too, in lower tax receipts.
It’s not a question of how hard people work –
Poor productivity means we are putting in more and getting less out.
It means too many businesses and workers don’t have the tools they need:
Trains that run on time,
Broadband that’s fast and reliable,
Access to new technologies,
Or proper training so people have the right skills for the job.
For a long time, commentators have talked about Britain’s ‘productivity puzzle’.
But it’s not a puzzle.
The causes of our economic underperformance are well understood.
The chronic stop-go cycle of public investment has left us with roads full of potholes, high energy prices and unstable conditions for vital business investment in skills and technology…
…and long-term failure to invest in our regions has built growth on a narrow base - with some parts of the country forging ahead while others fall behind.
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All this meant that when the pandemic arrived our country was under-prepared…
…our public services weakened and our economy fragile.
And we finished the pandemic with higher death rates and higher debt than our peers.
This isn’t about relitigating old choices.
It’s about being honest with people about the consequences those choices have had.
It is my job to deal with the world as we find it…
…not the world as I would wish it to be.
Not to commentate or speculate,
But to act.
In my Mais lecture last year, I set out our plan for solving our productivity problem through a programme of stability, investment and reform,
And when I became Chancellor, I began to put that plan into action.
Stabilising our public finances –
Making the tax and spending decisions to get debt down and to fund our public services sustainably.
Changing the fiscal rules to increase public investment by £120bn over the course of this Parliament…
…and crowding in private investment too…
For road and for rail, for housing and nuclear power.
And reforming our economy:
Ripping up the planning rules so we can build housing and infrastructure across the country…
Bringing the brightest and best to our shores with a new visa regime…
And signing trade deals with the EU, the US and India to help our businesses export around the world.
We have begun to see the results of those plans…
…in falling interest rates and falling NHS waiting lists…
…in rising wages and rising investment.
But I know that real progress takes time.
Our growth was the fastest in the G7 in the first half of this year – but I don’t expect anyone to be satisfied with growth of 1%.
I’m not – and I know there is more to do.
The first part of our planning reforms will add an additional £6.8bn to the size of our economy in the next five years,
But the next part – our planning bill – must complete its passage through Parliament before it can make a difference.
Interest rates, which rose from 0.1% to 5.25% in the last Parliament, have now been cut five times…
…but at 4% they are still a constraint on business borrowing and a burden on family finances.
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…and the choices I make in the Budget this month will be focused on getting inflation falling…
…and creating the conditions for interest rate cuts to support economic growth and improve the cost of living.
I understand the urge for easy answers.
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The UK’s national debt now stands at £2.9trillion:
Equivalent to 95% of GDP.
[political redaction] our borrowing costs were in the middle of the pack compared to other advanced economies…
…but now, we have the highest borrowing costs of any G7 country.
Today, 1 in every £10 of taxpayer’s money is spent on debt interest.
Not on paying that debt down…
…but just paying the interest to our creditors.
At the Budget last year, I changed the fiscal rules to strike a careful balance:
To invest more in capital alongside a credible plan to grow our economy and bring debt down within this Parliament.
That was the right decision to break the cycle of low productivity and low growth.
But that additional investment can only be delivered because markets know that my commitment to the fiscal rules is ironclad.
Some people say we should just sidestep those rules…
…that we can borrow more without consequences by simply reclassifying areas like defence or education.
But no accounting trick can change the basic fact that government debt is sold on financial markets.
There are limits on the price that banks, hedge funds and pension funds are willing to pay for our debt…
…and we are competing constantly with other countries also selling debt .
The more we try and sell, the more it will cost us.
It is important that everyone – the public and politicians - understands that reality.
The less we spend on debt interest, the more we can spend on the priorities of working people…
…our NHS, our schools, our national security…
…the public services essential to a decent society and a strong economy.
At the Budget last year, I provided our public services with a vital cash injection…
…and I’m proud of that choice:
Proud that it [political redaction] that is providing record investment in our NHS getting waiting lists down by over 200,000 since the election,
Proud that it [political redaction] that is investing in our children through the rollout of free breakfast clubs and free school meals,
And proud that it [political redaction] that is funding our armed forces and remains resolute in our NATO commitments.
The alternative is to row back on those investments:
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Stifling our economic growth,
And weakening Britain’s foundations in an unstable world.
I will not repeat those mistakes.
But if we want strong public services in the decades to come, then we must recognise that productivity and efficiency are not only a challenge for business, but they are a challenge for our public sector too.
At the Spending Review I announced £14bn of efficiencies per year to be delivered by 2029:
Cutting government spend on consultancies,
Getting rid of bureaucratic quangos and regulators,
And driving efficiency through AI and digital technologies.
But I know that there is more to do,
In the Budget and beyond, I will continue to drive for more productive and more efficient public services, right across government…
…making savings and rooting out waste wherever I find it.
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When I was appointed Chancellor, people put their faith in me to take our country forward…
…not to be swayed by political convenience…
…not to always do what is popular, but to do what is right.
At the Budget, I will continue to deliver on the priorities of the British people:
Cutting NHS waiting lists, cutting the national debt and cutting the cost of living.
And in the context of the long-term challenges on our productivity and heightened global uncertainty…
…any Chancellor of any party would be standing here today, facing the choices that I face.
The difference is in the priorities – and the values – that will guide those choices:
Mine will be a Budget for growth with fairness at its heart…
…and a Budget that supports businesses – to create jobs and to innovate.
As I take my decisions on both tax and spend…
…I will do what is necessary to protect families from high inflation and interest rates…
…to protect our public services from a return to austerity…
…and to ensure that the economy that we hand down to future generations is secure, with debt under control.
If we are to build the future of Britain together, we will all have to contribute to that effort…
…each of us must do our bit for the security of our country and the brightness of its future.
There is a reward for getting these decisions right,
To build more resilient public finances – with the headroom to withstand global turbulence…
…giving business the confidence to invest and leaving government freer to act when the situation calls for it,
To continue to invest in our infrastructure and our industry to build a stronger economy,
And to get the cost of borrowing down – spending less on debt interest, and more on schools and our health service.
The Office for Budget Responsibility will make their forecasts at the end of this month…
…but let’s be clear about what forecasts are:
They are not visions of the future…
…they are a look in the rear-view mirror.
The OBR rightly make their predictions based on the data that has gone before…
…but I do not believe that our past has to determine our future…
…or that a stuttering economy, poor productivity and falling living standards is somehow Britain’s destiny.
A brighter future is within our grasp.
We were elected to break with the cycle of decline…
…and this government is determined to see that through.
So we will go further and faster, on planning, on the industrial strategy, on reforming to regulation…
…all to deliver growth throughout our economy, in all parts of our country.
We will bear down on waiting lists, on the cost of living, and on the national debt which compound these challenges…
…and when that requires hard choices, we will act – guided by the interests of working people.
We were elected on a commitment to put country before party; the national interest before political calculation…
…and, whatever challenges come our way – whatever challenges come my way – we will not be swayed from that.
At the Budget this year, I will continue to build the strong foundations to secure Britain’s future.
For a fairer Britain
A more prosperous Britain
A Britain with an economy that works for everyone.
Thank you very much.