Rachel Reeves has suggested higher taxes on the wealthy will be part of her Budget next month.
The Chancellor was speaking in Washington on Wednesday, when she acknowledged she was looking at potential tax rises and spending cuts to fill a hole in her Budget which she said was partly due to the lingering impact of Brexit.
It came amid speculation on the measures she will take to fill the estimated £50m blackhole, with a cut to the cash ISA allowance for savers reportedly among the ideas.
When asked whether higher taxes on the wealthy would feature as part of her November 26 statement, Ms Reeves, who was in the US for the International Monetary Fund (IMF) meeting, said: “That will be part of the story.
“In the budget next month, there won’t be a return to austerity. We know that we face a changing global environment in terms of the economy at the moment.”
She also said there had been scaremongering over her decisions last year that hit the pockets of the wealthy.
She said: “Last year, when we announced things like the non-doms, like the (tax increase for) private equity, like the VAT on private school fees, there was so much bleating that it wasn’t going to raise the money – that people would leave.
“The Office for Budget Responsibility will publish updated numbers on all of those things. And that scaremongering didn’t pay off, because this is a brilliant country and people want to live here,” she said.
The budget is expected to include spending cuts and tax rises, which she blamed on the “severe and long lasting” impact of Brexit on the economy.
With no boom in economic growth, stubbornly high inflation and the mounting costs of government debt, Ms Reeves will have to fill a black hole estimated at around £50 billion by some economists.
On Wednesday, Labour promised to stand by its pre-election pledge not to hike VAT, income tax, or national insurance payments.
Before she departed for the US, she told Sky News that “of course, we’re looking at tax and spending”.
She confirmed the budget watchdog had “consistently overestimated” the UK’s productivity, with the expected downgrade of its previous assumptions likely to make Ms Reeves’ task even harder.
Asked if she was now in a “doom loop” of having to constantly hike taxes to fill a black hole, Ms Reeves said she would not use those words but “nobody wants that cycle to end more than I do”.
She said: “Challenges are being thrown our way, whether that is the geopolitical uncertainties, the conflicts around the world, the increased tariffs and barriers to trade and now this review looking at how productive our economy has been in the past and then projecting that forward.
“But I won’t duck those challenges. Of course, we’re looking at tax and spending as well, but the numbers will always add up with me as Chancellor because we saw just three years ago what happens when a government, where the Conservatives, lost control of the public finances – inflation and interest rates went through the roof.”
She said reforms to the planning system would help “get back to building in Britain”.
