I won’t quit even if I break my promise not to raise tax, Rachel Reeves says – after warning EVERYONE is set to suffer in her next Budget

Tonight challenger Rachel Reeves insisted she will not resign even if she breaks her promise on taxes, as it increasingly appears she will.

In a highly unusual move in his early morning speech in Downing Street, the Chancellor hinted that he was considering the first increase in the basic income tax rate in half a century, saying ‘we will all have to contribute’ to the 26 November Budget.

Such a move would be a flagrant breach of Labour’s manifesto pledge not to increase income tax, National Insurance or VAT, and would trigger Tory calls for him to be sacked.

But Ms Reeves said she ‘will not walk away because the situation is difficult’.

The Chancellor has been branded a ‘dreamer’ after blaming everyone from Covid to Donald Trump for his plan to raise taxes on millions of workers.

In an ominous address to the nation while most people were eating breakfast or trying to get the kids off to school, the Chancellor suggested further tax increases were needed in this month’s Budget and repeatedly refused to rule out manifesto-busting increases in income tax, VAT or National Insurance.

But Ms Reeves, who just last year implemented the biggest tax-increasing budget in history, has refused to accept responsibility for Britain’s economic woes.

Instead, he outlined a long list of factors, including Brexit, the Conservatives, Covid, the Ukraine war and President Trump’s tariffs to justify a new round of tax increases.

Speaking in the Downing Street media room three weeks before the Budget, the Chancellor hinted at broad-based tax rises affecting millions of people, saying ‘each of us must do our bit’.

He added: ‘If we are to build Britain’s future together, we will all need to contribute to the effort.’

Ms Reeves acknowledged that cutting spending rather than raising taxes was ‘a different way’. But he rejected the idea, saying: ‘The reason our productivity is so low is because governments have been doing this for the last 14 years.’

Asked whether it was important for Labor to keep the promises made in its tax manifesto, he said: ‘It is important for people to be honest. ‘Everyone can see that this year has thrown many more challenges our way.’

Alex Burghart, a leading figure in the Conservative Party, described the Chancellor’s speech as ‘banal, delusional and dangerous in equal measure’.

Kemi Badenoch branded it a ‘long pancake bomb’.

The Conservative leader, who used his own speech on the economy to call for welfare cuts, accused the Chancellor of producing ‘a list of excuses’ for Britain’s flagging economic performance under Labour. He said the government had ‘given up’ on trying to live within its means.

Ms Badenoch added: ‘He blamed absolutely everyone for his own choices, his own decisions and his own failures. ‘It’s clear he can’t get Britain working again.’

Asked whether it was important for Labor to keep the promises made in its tax manifesto, he said: ‘It is important for people to be honest. Everyone can see that this year has thrown many more challenges our way.’

Nigel Farage said the Chancellor’s willingness to consider breaking Labor’s manifesto tax commitments showed people “cannot trust a word Rachel Reeves says”.

Shadow Chancellor Sir Mel Stride said Ms Reeves ‘should get the axe if she breaks her promise and pays the tax’.

But the Chancellor refused to resign tonight. He told LBC’s Tonight with Andrew Marr that his departure would create turmoil in financial markets as he was “trusted with the public finances”.

He added: ‘I’m not going to walk away because the situation is difficult. ‘I was appointed Chancellor to fix our economy and I am absolutely determined to get the job done.’

Sir Keir Starmer today warned the Cabinet that the budget will be a ‘pivotal moment’, with the high cost of government borrowing and ‘worldwide events’ making life even more difficult.

The Prime Minister said that ‘previous governments resorted to austerity and this made things worse rather than better’. He said that the government ‘will not go down this path or the path of taking risks by borrowing more’.

The Chancellor said the Budget will prioritize shortening NHS waiting lists, reducing government debt and tackling the cost of living. Stabilizing the economy and boosting growth could pave the way for future tax cuts, he said.

In response to the Chancellor’s speech, the pound fell and the FTSE 100 index of leading shares fell sharply.

Rachel Reeves added: ‘I’m not going to walk away because the situation is difficult. ‘I was appointed Chancellor to fix our economy and I am absolutely determined to get the job done.’

Ms Reeves said she wanted to reduce ‘speculation’ about the Budget, which is already causing some people to withdraw money from their pensions and damaging confidence in the housing market.

But last night’s decision to claim higher taxes without giving any indication of where they might fall risked triggering a new wave of speculation.

And experts have questioned his claim that he bears no responsibility for Britain’s economic woes.

Andrew Sentance, a former member of the Bank of England’s monetary policy committee, said: ‘What Rachel Reeves will not accept is that her decisions on public spending have led to the government’s fiscal problems. Increased spending by £100bn a year over previous plans; ‘Therefore much larger tax increases than the £40bn announced last October were needed.’

Louise Jenkins, managing director of Alvarez & Marsal Tax, said the decision to raise the basic income tax rate for the first time in 50 years ‘could be this government’s decisive move’.

He accused Ms Reeves of ‘creating a crisis’ and added: ‘Stop blaming others. Breaking the commitments in the manifesto is not something imposed on you; This is a police outing, treason and the death knell for investment.’

Economist Paul Johnson, former director of the Institute for Fiscal Studies, said it was fair for Ms Reeves to blame the last government for some of the economy’s problems.

But he said this could not be used to justify Labor breaching its tax commitments because problems such as long-term low productivity ‘could have been foreseen in last year’s election or budget’.

The Chancellor said the Budget will prioritize shortening NHS waiting lists, reducing government debt and tackling the cost of living. Stabilizing the economy and boosting growth could pave the way for future tax cuts, he said

He added: ‘When did we know the risks? [Labour’s] Tax promises were made. That’s what he did.”

Ms. Reeves was also accused of fueling inflation.

Official figures show that inflation in the UK and the Eurozone stood at 1.7 percent in September last year; This took place ahead of his first Budget as Chancellor the following month.

But since then, inflation in Britain has risen to 3.8 per cent, compared to just 2.2 per cent in the single currency bloc.

Ms Reeves admitted today that ‘inflation is too slow to fall’ in Britain; he apparently ignored the increase in his own surveillance.

Economists have laid the blame at the Chancellor’s door, pointing to price-boosting decisions such as a £25bn National Insurance tax raid on employers, a massive increase in the minimum wage and buffer pay increases for public sector workers.

Simon French, Panmure Liberum’s chief economist, said government policies may have contributed as much as 1.2 per cent to inflation.

This suggests inflation could be as low as 2.6 percent instead of 3.8 percent currently, paving the way for further rate cuts.

Julian Jessop, economist at the Institute of Economic Affairs, said: ‘Rachel Reeves says inflation is too slow to fall in the UK. In fact, inflation has risen – largely due to policy choices made by the Labor government.’