Rachel Reeves hints at tax rises in Budget as she heads to Riyadh in search of trade deal
Tax rises are on the table ahead of next month’s Budget, Rachel Reeves has said, amid growing speculation about how the Chancellor will fill a black hole of up to £50bn.
Sending a strong signal that some form of tax rise could be on the table, the chancellor suggested the government must ensure there is “sufficient headroom” in its spending plans and that its fiscal rules are met.
The Chancellor had previously insisted Labour’s manifesto pledge not to increase income tax, national insurance or VAT was still “valid” when asked in November how he would plug the fiscal black hole.
But just last week, when asked about claims that the Treasury was considering an income tax increase, Ms Reeves reportedly said she would “continue to support working people by keeping their taxes as low as possible” but that she was still “going through the process” of creating the Budget.
He is expected to use the budget to raise taxes once again, with the Institute for Fiscal Studies estimating he will need to find £22 billion through tax rises or spending cuts to comply with his self-imposed fiscal rule.
Meanwhile, the National Institute for Economic and Social Research has suggested the black hole could be as large as £50bn due to stagnant productivity, government U-turns and higher-than-expected interest payments.
in conversation Luck At the magazine’s global forum in Riyadh, Saudi Arabia, on Monday, Ms. Reeves did not rule out the possibility of tax increases when asked whether they would be considered as part of the budget.
“The basis of economic growth is stability and I will not break the fiscal rules we have set,” the Chancellor replied.
He added: “We will reduce the primary deficit, we will start to reduce the debt as a ratio of GDP because we need more sustainable public finances, especially in the uncertain world we live in today.
“So growth will be a big part of the Budget story, so much so that frankly I think growth has been neglected as a fiscal policy tool over the last few years.
“But of course we also look at taxes and spending, so we make sure we’re both resilient to future shocks, we make sure we have enough space, but also that those fiscal rules are followed.”
Asked whether she would consider imposing higher taxes on the wealthy in the budget, Ms Reeves insisted: “There is another way to improve the fiscal situation: growing the economy.”
It appears Ms. Reevesis is seriously considering introducing a mansion tax into the budget; This means owners of properties worth at least £2 million face an annual fee of 1 per cent of the amount their property exceeds that value.
But the chancellor defended the government’s approach to wealth when he was asked why some of Britain’s richest people were leaving the UK for other countries.
“Everyone knows that countries around the world are having to spend more on defence, that we need to restructure our public finances and public services, and that everyone who makes Britain their home needs to contribute to this,” the Chancellor said.
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He added: “We don’t want to expel anyone from the UK, but we want to make sure we tax fairly the people who make Britain their home, no matter what country they or their parents are originally from.”
The chancellor is leading a British delegation to Saudi Arabia in search of economic growth, with less than a month until the potentially difficult budget.
During the visit, Ms Reeves also stated that she was “confident” a trade deal could be concluded with the Gulf Cooperation Council (GCC); The Treasury hopes this deal will add £1.6 billion to the UK economy and add an additional £600 million to UK workers’ annual wages in the long term.
The chancellor acknowledged arriving at his event at the Fortune conference “a little late” and told the audience it was the result of “really good meetings” about the deal.
Ms. Reeves said she hoped conference participants would “agree that if we can get the Gulf Cooperation Council (GCC) deal through, it’s worth it,” later adding: “And yes, I’m confident we can get that deal done.”
