Rachel Reeves gives biggest hint yet that manifesto pledge on taxes will be broken at Budget
Rachel Reeves has dropped the biggest hint yet that the government will fail to deliver on the promises it made in its tax manifesto in the Budget.
The Chancellor said it would be “possible” for ministers to stick to their election promises but warned it would mean “deep cuts” in other areas of spending.
Speculation has been rife in recent days that the Chancellor is preparing to raise income tax in the budget at the end of this month to balance the country’s budget.
Labour’s manifesto for the 2024 general election campaign promised that the party would not increase income tax, VAT or national insurance.
In the same interview on Monday, Ms Reeves suggested she was open to removing the two-child benefit cap, saying it was not right for children to be “punished” for being part of large families.
The Chancellor said it was important not to allow “the cost to our economy of allowing child poverty to go unchecked”, adding: “After all, a child should not be penalized just because their parents don’t have a lot of money. Now, in many cases, you may have a mother and a father who are both working, but perhaps one of them has a chronic illness, perhaps one of them has passed away.”
“There are many reasons why people find themselves in difficult times after deciding to have three or four children.”
He added: “So we will take action against child poverty. The last Labor government proudly reduced child poverty and we will reduce child poverty too.”
Speaking to BBC Radio 5 Live, Ms Reeves said when Labor created its manifesto: “We had spending commitments and the tax changes that were needed to pay for them… the reality is that what we inherited is much worse.”
Insisting on the party’s commitment to the manifesto, the chancellor told the station: “I will set out the options in the Budget.
“It would of course be possible to stick to the commitments in the manifesto, but that would require things like deep cuts in capital spending.
“And the reason our productivity and growth has been so weak over the last few years is that governments have always taken the easy option – to reduce investment in rail and road projects, energy projects and digital infrastructure.
“As a result, we never managed to restore our productivity to the level it was before the financial crisis.
“So we always have choices to make, and I promised during the election campaign that I would bring stability back to our economy. I can promise now, I will always do what I think is right for our country.”
Warnings have been made that Number 10 could face a backlash from ministers if the manifesto’s promise is not fulfilled.
The budget comes just months after the government backed down in the face of a rebellion from its own MPs on welfare reform.
Amid the unrest, MPs are pressing ministers to scrap the two-child benefit limit and Ms Reeves said on Monday that “child poverty should not be tolerated”.
He later added: “I also don’t think we can overlook the costs to our economy of allowing child poverty to go unchecked.
“And ultimately a child shouldn’t be punished just because their parents don’t have a lot of money.”
He promised that the government would “take action against child poverty.”
