Rachel Reeves has “no regrets” over potential breaches of Labour’s manifesto pledge not to raise certain taxes in the upcoming Budget, her spokesperson said.
It comes as the pound has fallen to a six-month low after Ms Reeves refused to rule out hiking taxes to plug a hole in the public finances in the pre-Budget address on Tuesday morning.
Sterling fell 0.3 per cent to $1.3064 – its weakest since April. The FTSE 100 Index meanwhile fell deeper into the red after the speech, down 1 per cent or 92.5 points lower at 9608.9.
The chancellor refused to rule out breaking Labour’s manifesto pledge not to raise income tax, VAT or National Insurance – saying “each of us must do our bit” as she paved the way for tax rises in her Budget later this month.
A leading think tank has warned that tax rises are “inevitable”, but said there was a way to implement them that “boosts confidence in the economy and the public finances, while also reducing child poverty and the cost of living”.
Following the speech, Sir Keir Starmer’s spokesperson backed Ms Reeves and pointed to “fresh challenges”, including tariffs deterring business investment and dampening growth, high inflation and the increasing cost of borrowing.
Scottish Labour leader says he will cut income tax if elected
The leader of Labour in Scotland has refused to say whether Rachel Reeves will break the party’s manifesto commitment not to raise taxes – but added he would cut it in Scotland if elected.
Anas Sarwar said taxpayers will have to “wait and see” what is in the Chancellor’s Budget on November 26.
Asked if he can guarantee Labour will not break its manifesto pledges, Mr Sarwar told the PA news agency: “Let’s wait and see what’s in the Budget in a few weeks’ time.
“She is the UK Chancellor that’s responsible for income tax in England and Wales.
“Income tax in Scotland is the responsibility of the Scottish Government, and actually the only person that’s been campaigning loudly for the last two years for a rise in income tax in England and Wales is John Swinney, and he’s the very same man negotiating the fiscal framework.”
Income tax in Scotland is currently higher for middle and higher earners compared to those living in England.
Mr Sarwar said taxes are “too high” in Scotland and he is “clear” Scottish Labour will bring down the tax burden if the party wins next year’s Scottish election.
Chancellor has ‘no regrets’ if Labour break promise not raise taxes in Budget
Rachel Reeves does not regret potential breaches of Labour’s manifesto promise not to raise certain taxes, her spokesman said.
Asked whether she does, a spokesman for the Chancellor told reporters: “No. And again, I think she’s been asked this question previously.
“Those manifesto commitments were made because we recognised that working people had been asked to pay the price of 14 years of Conservative failure.”
Pressed on concerns that breaking manifesto pledges could further erode public trust in politicians, Sir Keir Starmer’s spokesman said: “Voters put their trust in Government to make tough decisions, not just popular ones.
“We’ll do whatever is necessary to protect families from high inflation and interest rates, protect our public services and guarantee the investment necessary for our economic future.”
The official pointed to “fresh challenges”, including tariffs deterring business investment and dampening growth, high inflation and the increasing cost of borrowing.
Downing Street insist speech was ‘setting out broad context’
Downing Street insisted the Chancellor’s remarks this morning had been about “setting out the broad context” for her decisions at the Budget amid questions about the intention of her speech.
Asked why the Government would not explicitly use the phrase “tax rises”, the Prime Minister’s spokesman said: “I think the Chancellor has been clear this morning that she is not going to get ahead of the Budget in a few weeks’ time.
“That will be set out then and not beforehand. But as I say, this morning was about setting out the broad context for that Budget. As she said, the public can see the challenges that we face.”
Asked what the point of the speech was, he said: “The Chancellor said she’d be upfront with the public about the problems facing Government, and that’s exactly what she did.
“People deserve to know about the economic choices we have to take, and why we have to take them, and that’s what she set out this morning.”
John Rentoul: Rachel Reeves came to reassure us… but ended up on the rack
Watch: Rachel Reeves refuses to rule out hiking income tax, VAT or National Insurance in Budget
‘No more tax on business’, industry leaders say
Key business figures have urged Rachel Reeves to make sure there is ‘no more tax on business’ at her next Budget.
Jonny Haseldine, Head of Business Environment Policy at the British Chambers of Commerce, said the chancellor’s ambitions to grow the economy, reduce inflation and boost productivity will not be possible “if costs continue to pile up on firms”.
“That’s why our message is clear – no more tax on business,” he said. “The Chancellor spoke this morning about choices, hitting firms in the pocket once again would be the wrong choice.
“Our latest research shows business confidence and investment levels continue to suffer. A fifth of firms are expecting lower turnover for the next year, and a quarter have scaled back investment plans.
“Improving the business landscape requires a Budget that boosts trade, tackles the skills problem and turbocharges infrastructure.
“Firms across the UK are already feeling bruised and many are struggling to keep their heads above water.
“November 26th is a make-or-break moment for British business – the Budget must deliver.”
Sean O’Grady: Forget alarm-clock Britain – Reeves was talking to the bankers
Which taxes could rise at next Budget?
Here are some of the other options the chancellor may be considering ahead of the Budget on 26 November:
Analysis: It won’t just be those with the ‘broadest shoulders’ facing tax rises
The Independent’s political correspondent Millie Cooke reports:
Rachel Reeves has given her strongest hint yet that she will raise income tax across the board, saying “we will all have to contribute” to building a new future for Britain.
This is a break from her typical insistence that “those with the broadest shoulders” would have to pull their weight to restore Britain’s ailing public finances.
Instead, the chancellor appears to be preparing the public for tax rises that could hit even middle income earners – and those who are likely to come under the government’s (admittedly vague) definition of “working people”, in breach of their manifesto pledge.
