PA MediaMinisters are facing questions about which taxes could rise in a matter of weeks after Rachel Reeves warned everyone will “have to contribute” to securing the country’s economic future.
The chancellor was even told by the Tories to resign if she goes ahead with raising taxes in the November 26 Budget.
In an unusual speech just three weeks out from the major fiscal statement, the chancellor on Tuesday would not commit to Labour’s manifesto promises not to raise income tax, national insurance or VAT, fuelling speculation.
The Budget will focus on cutting NHS waiting lists, and addressing the cost-of-living crisis, the chancellor said, as well as reducing the burden of interest on government debt.
Reeves also wants to give herself a bigger buffer than the almost £10bn she previously had against her rule of balancing day-to-day spending with tax receipts in 2029-30.
She suggested she would neither cut her major spending plans, nor reach for the lever of more borrowing to meet her commitments, further hinting that tax rises are needed to sustain the public finances.
The National Institute of Economic and Social Research, a major economic think tank, said the chancellor must plug a £50bn black hole in the nation’s public finances and give herself a larger fiscal headroom.
It suggested a 2p rise in income tax was likely needed to address the hole, echoing a similar suggestion by the Resolution Foundation, another think tank which has been influential upon the Government’s thinking.
The Guardian newspaper reported that Ms Reeves is planning to cut green levies from energy bills in order to slash them by £170 on average.
The focus on reducing energy bills is intended to bolster Labour’s place in the polls, and mitigate the impact of expected tax hikes, the newspaper said.
Elsewhere, the Times reported some senior figures within the Government are unhappy with the chancellor’s plans.
“Breaking the manifesto will mean we lose some voters forever,” said an anonymous minister quoted in the newspaper.
Shadow chancellor Sir Mel Stride, meanwhile, suggested his counterpart must stand down if she goes ahead with tax rises.
The senior Tory said: “This is about choices. If Rachel Reeves breaks her word and raises taxes again, she must go.
“A responsible chancellor would get a grip on spending – including the welfare bill – not reach for yet another tax rise.”
But the Chancellor insisted on LBC’s Tonight With Andrew Marr that she would not take such a step.
“And what do you think would happen in financial markets if I did that?” she told the broadcaster.
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