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Rachel Reeves: We’ll have to raise taxes in the Budget
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- Author, Mitchell Labiak
- Role, Business Reporter, BBC News
- July 30, 2024
Updated 1 hour ago
The Chancellor said the government was likely to raise some taxes in the October Budget after months of speculation about Labour’s stance on taxes.
“I think we’re going to have to raise taxes in the Budget,” Rachel Reeves told the News Agents podcast.
She was responding to a question about fundraising following her claim on Monday that the previous government left a £22 billion “hole” in the public finances.
Labour repeatedly said during the election campaign that there would be no tax rises for “working people”, but the Conservatives insisted that Labour would raise them.
Speaking on the podcast, the chancellor was asked which taxes the government would raise.
Ms Reeves reiterated that the government would not raise VAT, national insurance or income tax as promised in Labour’s manifesto, but did not rule out raising inheritance tax, capital gains tax or pension reform.
“I’m not going to write a budget or start writing a budget on this podcast,” she said, adding that Labour wanted to follow “sensible” rules aimed at reducing the government’s long-term debts.
Ms Reeves’ comment came after she cancelled a series of infrastructure projects and announced that the winter fuel allowance for pensions would be means-tested, as part of a raft of measures aimed at tackling a shortfall in the public finances.
Labour and the Conservatives are locked in a dispute over who is to blame for the lack of money in the public coffers.
In response to Ms Reeves’ podcast interview, Shadow Chancellor Jeremy Hunt wrote on social media platform X: “By refusing to take the tough decisions needed, Rachel Reeves will do what she planned all along, like every Labour Chancellor in history: raise your taxes.”
On Monday, however, Ms Reeves said previous “undisclosed” spending by the Conservatives had forced her to cut the winter fuel allowance and make billions in other cuts.
Mr Hunt denied this, saying the last government was “open” about public finances.
He insisted Labour’s decisions were a choice, criticising the government’s spending announcements since taking power.
The National Wealth Fund, GB Energy and public sector pay rises amounted to billions, he said.
“If you make those choices you will have to pay tax and she should make it clear that those are her decisions,” he told BBC Breakfast on Tuesday.
The Institute for Fiscal Studies (IFS) said some of Labour’s claims about hidden spending by the previous government “appear” to be correct.
This includes £6.4bn on the asylum system, including the Rwanda deportation scheme, a figure IFS director Paul Johnson called “huge”.
However, he added that “half of [the] “The ‘hole’ in spending is the public pay on which the government made a choice and where the pressures were known.”
The Labour Party has already confirmed some tax increases and the Chancellor has previously hinted at “difficult decisions” that need to be made.
On Monday, Ms Reeves announced a windfall tax on oil and gas companies, plus VAT on private school fees — both manifesto commitments.
In response, Liberal Democrat Treasury spokeswoman Sarah Olney called on Labour to go further and make big business “pay their fair share” of tax.