Image source, Getty Images
- author, Mitchell Labiak
- Role, Business Correspondent, BBC News
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The Chancellor said the government was likely to raise some taxes in the October Budget after months of speculation about Labour’s stance on tax.
“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 after claiming on Monday that the previous government had left a £22bn “hole” in the public finances.
Labour repeatedly said during the election campaign that there would be no tax increases on “workers”, but the Conservatives insisted that Labour would raise taxes.
Speaking on the podcast, the Chancellor was pressed on what taxes the government would impose.
On Tuesday, Ms Reeves reiterated Labour’s election manifesto commitment to no VAT, no national insurance, no income tax increases, but she did not rule out inheritance tax, no capital gains tax, no pension reform.
“I will not write a budget or start writing a budget on this podcast,” she said, adding that Labor wanted to stick to “sensible” rules aimed at reducing the government’s long-term debt.
Ms Reeves’ comments come after she cancelled a number of infrastructure projects and announced that the winter fuel allowance for pensions would be means-tested, among a series of measures aimed at tackling the public finance deficit.
Labour and the Conservatives have been locked in a row over who is to blame for the lack of money in the public purse.
Ms Reeves said on Monday that the Conservatives’ “undeclared” spending had forced her to scrap the winter fuel allowance and make billions of dollars in other cuts.
Shadow chancellor Jeremy Hunt denied this, saying the previous government had been “open” about the public finances.
He stressed that the Labour Party’s decisions were a choice, criticising the spending announcements made by the government since winning power.
He added that the National Wealth Fund, GB Energy and public sector wage increases amounted to billions of dollars.
“If she makes these choices, she will have to raise taxes, and she should be clear that these are her decisions,” he told the BBC on Tuesday.
The Institute for Fiscal Studies said some of Labour’s claims about hidden spending by the previous government “appear” to be true.
This includes £6.4bn in the asylum system, including the Rwanda deportation scheme, a figure described by the Institute for Fiscal Studies director Paul Johnson as “huge”.
However, he added, “Half [the] “The ‘hole’ in public spending is the spending that a government incurs based on the choices it has made and the pressures it has been subjected to.”
Labour has already confirmed some tax increases, and the chancellor had previously hinted at the need to take “difficult decisions”.
On Monday, Ms Reeves announced a windfall tax on oil and gas companies and a VAT on private schools – both commitments in the election manifesto.
In response, Liberal Democrat Treasury spokeswoman Sarah Olney urged Labour to go further and force big businesses to “pay their fair share” of tax.