Public finances are in a “challenging state”, a senior cabinet minister has acknowledged amid speculation that Rachel Reeves could hit the rich with tax rises in the budget.
Health Secretary Wes Streeting admitted there were problems with the economy and said households were also feeling the pressure.
But he insisted that there were “green shoots” of economic recovery “but we are not out of the woods yet.”
The Mail on Sunday reported that Ms Reeves is considering a new mansion tax that would hit property owners with an annual charge of 1% of the amount by which their value exceeds £2 million, meaning a levy of £10,000 a year on homes worth £3 million.
The Sun suggested on Sunday it was considering a 2p rise in income tax that would break the manifesto.
Streeting said he would not be drawn into “wild budget speculation” ahead of Reeves' testimony next month.
He told GB News: “We are going to wait for the Chancellor to set her budget. “People can see that the public finances are in a challenging state.
“So is the economy, but so is family finance, so is business finance, we recognize that, we have to get our economy growing again.”
The United Kingdom had the fastest economic growth of the G7 in the first quarter of 2025, but forecasts from the International Monetary Fund (IMF) suggest the United States will overtake Britain throughout the year.
Streeting said: “There have been some encouraging signs in terms of interest rates and the UK is projected to be the fastest growing economy in the G7, those are all things to be encouraged.
“But we are not out of the woods yet. The Chancellor has a challenging job. She has many considerations to balance and will set out her options in the Budget and not before.”
Streeting told Sky News: “I think there are green shoots of recovery in the NHS, in the economy, in our public services, but there is also much more to do, and we have to attack those challenges with the level of energy and focus that the scale of the challenge demands.”
Reeves is likely to face tax increases and spending cuts to fill a black hole in public finances when he delivers his budget on November 26.
Economists have suggested it will need to find between £20bn and £50bn to meet its target of balancing daily spending with tax revenues in 2029/30, and at least maintain its current reserve of around £10bn against that target.
Ms Reeves has hinted that the task will become more difficult if the Office for Budget Responsibility downgrades its assessment of productivity growth.
The historically small cushion Ms Reeves has left against her self-imposed tax rules means it can be eliminated by relatively minor variations in budget forecasts, leaving her scrambling for savings or additional tax revenue.
Former Bank of England governor Lord King criticized the Chancellor's “back of a fagot package” approach.
He told Sky News' Sunday Morning program with Trevor Phillips: “You don't solve that problem by simply adding another wealth tax.”
He suggested that if Reeves wanted to analyze the tax system, he should appoint a panel of experts to take the time to examine the issues and “come up with a coherent view.”
But he said: “That doesn't seem to be happening. What happens is that the OBR produces just before the Budget, a number, a number, and then they look for, you know, ideas, almost written on the back of a cigarette packet, about how a few billion more can be raised there.
“That's not a coherent fiscal strategy. And you could do a lot by thinking about that first.”
