HANG on to your economic hats. On Wednesday, Rachel Reeves will present her long-awaited Budget. Keir Starmer’s Labour Party will have to put up or shut up, after four months of faffing about and tying itself in political knots.

Alas, Wednesday’s show could all be in vain for the Chancellor. The real economic decisions will be made on Tuesday, November 5, when America votes in the presidential election. If Donald Trump wins over Kamala Harris, interest rates will jump here – they are already climbing in anticipation. And that will seriously banjax Labour’s economic plans.

Reeves’s economic strategy has been well leaked so far, and the reason that the Chancellor has announced so much of her Budget in advance is purely because she wants to keep the financial markets calm.

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The Tories left Labour with a big black hole in the nation’s finances. This was well known before the election. Labour pretended otherwise because Reeves wanted to avoid hard questions about how she would balance the books. Hence all the nonsense about “discovering” a deficit in the accounts.

Reeves needs to find around £50 billion in savings and tax rises. The City financial spivs are very happy to lend this cash – They will make a bloody fortune. And nobody seriously thinks the Starmer government won’t pay up. The game is really about what interest rate the City can charge the Treasury (ie, the taxpayer).

Reeves has tried to talk down interest rates by claiming she will only borrow to invest, not to cover day-to-day costs. Hence her obsession with the fiscal “rules” she will stick to (maybe) over the next five years. Of course, she has already fiddled these rules a bit.

But bottom line, she still aims to bring down the total national debt (which is currently around the £2.8 trillion mark) as a proportion of GDP. Translated, that means she is telling the City she won’t pay interest over the odds.

But a Trump election victory will undermine Reeves’s parochial game plan. There are already strong signs across the globe that the markets are pricing in a Trump return. He intends to borrow and spend like there’s no tomorrow, and doesn’t give a fig about interest rates.

So US interest rates (and the yield on government bonds) are rising sharply, driving the dollar up too. The UK and the rest of the world will have to follow suit or they’ll see all their investment cash end up on Wall Street.

Put another way: Reeves won’t be able to avoid paying more for all the money she intends to borrow. The cost of UK Government bonds rose sharply at the end of last week. What are the consequences? First, more cash will have to be diverted from public services to rewarding the City spivs. Which means more austerity, not more public investment.

Second, rising borrowing costs affect companies and private businesses as well as the Treasury. Reeves is promising to boost investment in the economy but that is less likely if companies have to fork out more for borrowing. Already UK business activity growth has slumped to its lowest for nearly a year. None of this bodes well for the economy over the coming decade.

The Budget to really watch will be the one in 2025. If Reeves is still around, she will be struggling to balance the books. So she either abandons her self-imposed rule to start bringing down the national debt – in which case interest rates will soar – or she will have to cut public spending in spades. Or both.

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Either way, we will enter the 2026 Holyrood election with Labour in an economic panic. This suggests that the SNP and the national movement must put the economy first, second and third in the order of political priority for that election.

And that means being more creative when it comes to taxation policy in Scotland. Devolution gives the Scottish Parliament wide powers to create new taxes. Alas, successive SNP administrations have shied clear of tax reform. In particular, the long-held SNP plan to introduce a local income tax has simply vanished.

Of course, tax reform is the most difficult thing to achieve. Everybody agrees that Council Tax is a problematic and unfair, but no-one can agree on an alternative. Suggest a local income tax and the political opposition will use the idea as a big stick to clobber you.

But here’s the difficulty. If we face a new round of Labour austerity, the SNP will have to counter with something radical and workable. Austerity cuts will fall hardest on local government, as they always do.

Earlier this year, Audit Scotland published a report saying Scotland’s councils face a significant gap between the cash needed to deliver local services and the money they have available.

Together, Scotland’s 32 councils have a funding gap of £585 million. This is estimated to increase to £780m by 2026-27. Result: existential cuts to basic services. The situation is the same down south; English councils face a £2.3bn funding gap in 2025-26, rising to £3.9bn in 2026-27.

This is why we need to rethink local government finance as a political emergency – but not simply as a quick and dirty way of raising more cash.

The notion of a local income tax is more than a revenue-raising device. It is hardwired into the idea of transferring genuine political power to local voters; to making cities bloom by giving them power over their own resources. Reforming local government finance is at the root about reviving democratic participation.

Putting democracy and local control at the heart of the 2026 Holyrood elections is the best way for the SNP to wrongfoot Anas Sarwar’s Labour branch office.

Politicians of all persuasions tend to believe that discussing tax reform is the fastest way to turn off the voters. But it is not the voters who have spent the past 30 years using every opportunity to claim all taxes are bad and that government spending is a social evil.

It is instead the political class that has weaponised the tax issue and made reform untouchable. The result has been to substitute borrowing for taxation – and also to empower populist figures such as Reform’s Nigel Farage and Trump, who don’t care about the sustainability of public finances.

This week, The National is running a series of articles on Council Tax. The aim is to stimulate debate. This is no academic or abstract question: Council Tax could lie at the heart of the next Holyrood Budget.

It is by no means certain that the minority SNP government can get this budget through Parliament, especially as the Scottish Greens are threatening to provoke an early election if First Minister John Swinney refuses to listen to their financial proposals.

This may be bravado but certainly there is a pending crisis. Labour, of course, will promise everything like good opportunists do. Rather than being on the back foot, the SNP need to reopen the issue of Council Tax reform.

I doubt if we will see any surprises in Reeves’s Budget this week. Doubtless there will be a wee bit more capital allocation for Scotland, but these will be the leavings.

It’s time for Scotland to control its own taxes and spending.