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Taxes will likely be raised in the Budget, Rachel Reeves has said.
The Chancellor said Labour would stick to its election manifesto promises not to raise national insurance, income tax or VAT, but left open the possibility for other tax hikes at the Budget on October 30.
“I think that we will have to increase taxes in the Budget,” she said while speaking to The News Agents podcast.
Ms Reeves‘ admission comes a day after she scrapped a series of infrastructure projects, and announced the winter fuel allowance for pensions would be means-tested, among a series of measures aimed at filling a £22 billion black hole in the public finances.
Ms Reeves did not state what taxes would be raised when asked on the podcast whether Labour would stick to its manifesto promises, and instead raise inheritance tax or capital gains tax, or undertake pension reform.
She said: “We had in our manifesto a commitment to fiscal rules to balance day-to-day spending through tax receipts, and by the end of the forecast period, to get debt down as a share of GDP.
“Those are sensible fiscal rules to keep a grip of the public finances. We also made other commitments in our manifesto, not to increase national insurance, VAT or income tax for the duration and we’ll stick with those.”
Pressed again about which taxes could go up, she added: “We will have a Budget on October 30 and ahead of that Budget, we will have a forecast by the Office for Budget Responsibility on this occasion, based on accurate numbers.”
On Monday, the Chancellor said she was making “difficult decisions” as she accused the previous government of leaving £21.9 billion of unfunded commitments that it had “covered up from the country”.
In a statement to Parliament, she set out “immediate action” to address the shortfall by £5.5 billion, with the rest of the gap to be addressed at the Budget.
But her predecessor Jeremy Hunt claimed around half of the “black hole” in spending was down to her deciding to give above-inflation pay rises to millions of public sector workers.
Ms Reeves announced during the statement she would agree recommendations by a raft of public sector pay review bodies, while also agreeing to hike junior doctors’ pay by around 20% over two years.
In a hint that taxes may have to increase, Ms Reeves said the Budget will “involve taking difficult decisions to meet our fiscal rules across spending, welfare and tax”.
Ms Reeves‘ statement to the Commons came after she ordered Treasury officials to undertake an audit of public spending when Labour came to office.
Among the spending commitments cancelled by the Chancellor are plans for the Stonehenge Tunnel, and to restore some previously closed railway lines, ending the Rwanda migration scheme, and abandoning Rishi Sunak’s “Advanced British Standard” in education, arguing the former prime minister “didn’t put aside a single penny to pay for it”.
A Treasury spokesperson said: “As we said yesterday, there will be further difficult decisions on tax and spending at the Budget on October 30.
“The Chancellor has not committed to any tax rises not already in the manifesto and has committed to not increasing national insurance, VAT or income tax.”
