New taxes on the rich will be ‘part of the story’ of Budget, says Reeves as she blames Brexit, Farage and the Tories… anyone but herself

The Chancellor announced that the rich will be targeted in the budget.

Asked whether her major announcement next month would include higher taxes on the rich, Rachel Reeves said: ‘That will be part of the story.’ But he denied it would lead to an exodus of better-off Britons.

Ms Reeves said during a visit to Washington DC for the International Monetary Fund’s annual meeting: ‘Last year, when we announced things like private equity, VAT on private school fees, there was so much bleating that if it wasn’t going to raise the money, people would leave.’

‘And this fear-mongering hasn’t worked because this is a great country and people want to live here.’

Last month he rejected the option of a ‘standalone wealth tax’. There is speculation it will instead target the wealthy by increasing capital gains tax rates, making landlords pay National Insurance on rental income or creating higher council tax bands for the most expensive properties.

Ms Reeves declined to comment on specific measures she would take to fill the £30bn black hole.

However, he promised: ‘There will be no return to austerity policies in next month’s budget.’

It came as Ms Reeves blamed Brexit, austerity and the Conservatives for Britain’s plight yesterday.

Shadow Chancellor Sir Mel Stride told the Daily Mail: ‘The Chancellor must start taking responsibility for his own mistakes’

The Chancellor has given the clearest signal yet that he will impose further tax rises, and has also signaled he wants to cut spending.

However, the government’s claim that it had to ‘compensate for some of the damage’ caused by leaving the European Union sparked a reaction.

Ms Reeves said: ‘Austerity, Brexit and the ongoing impact of Liz Truss’s mini-budget have all placed a heavy burden on the UK economy.’

Conservatives accused him of blaming ‘someone else’ every time the figures ‘don’t add up’.

Shadow Chancellor Sir Mel Stride told the Daily Mail: ‘The Chancellor must start taking responsibility for his own mistakes and accept responsibility for the bad decisions he has made; spiraling spending, failing to reform welfare, and crushing families with higher taxes to cover up his own economic mismanagement.

‘A theme emerges: When things go wrong, it’s never Rachel Reeves’ fault; But it’s always your family who pays the price.’

Ms Reeves’ comments underline Labour’s desperate new tactic of blaming Brexiteers, including Nigel Farage, for the country’s woes.

In an interview yesterday, the Chancellor came under fire over concerns that the UK was in a ‘doom loop’, crushing growth by raising taxes and then having to increase the burden again to balance the government’s books.

Ms. Reeves mixes gin with Sipsmith co-founder Jared Brown while visiting the Sipsmith distillery in Chiswick, London, on October 9

“Nobody wants this cycle to end more than I do,” he told Sky News, insisting he “wouldn’t use those words” to describe the UK’s position.

Ms Reeves effectively confirmed that the Office for Budget Responsibility had lowered its productivity forecasts after years in which they had proven to be overly optimistic.

This is one of the main reasons for the pressure on public finances.

Asked if ‘tax rises are on the way’, Ms Reeves said: ‘Yes, but I think… in terms of the ambition of this government, it’s big.’

Ms Reeves, who said she accepted tax rises were coming, said: ‘I was really clear during the general election campaign – and we discussed this many times – that I will always make sure the numbers come together.’

Yesterday No 10 did not repeat Labour’s manifesto commitment not to increase income tax, national insurance or VAT; This fueled speculation that the Government would not be able to keep its promise.

Instead, a spokesman for the Prime Minister pointed to Sir Keir Starmer’s comments two weeks ago that the manifesto was ‘valid’.

It comes as figures from the International Monetary Fund show Britain is on track to raise taxes at the fastest pace in the G7 group of developed countries.

Ms Reeves effectively confirmed that the Office for Budget Responsibility had lowered its productivity forecasts after years in which they proved to be overly optimistic

They found that revenues, largely from taxes, will grow as a percentage of gross domestic product from 38.3 percent in 2024 to 40.6 percent by 2029.

This increase of 2.3 percentage points was greater than that of the other members of the G7: Germany, France, Italy, Canada, the United States and Japan. Some even reduce their tax burden during the period.

And this equates to around £66bn in extra tax at current prices.

Martin Beck, chief economist at WPI Strategy, said: ‘This is a worrying signal for growth prospects and the UK’s ability to narrow the productivity gap with more dynamic economies.

‘The productivity-depressing impact of higher taxes threatens to leave the UK further behind.’

It comes as economists warn Reeves may need to find as much as £42bn next month to stop him ‘limping’ into the next Budget.

To avoid ‘fiscal groundhog day’ next year, the Institute for Fiscal Studies (IFS) has called on the Chancellor to avoid ‘minimising’ and instead be ‘bold’.

He warned that rising borrowing costs, weak growth forecasts and spending commitments made since the spring could leave him needing to find £22bn.

But the IFS said it would only restore the £10bn gap left by Ms Reeves in the last Budget and suggested it create a bigger buffer.

IFS director Helen Miller said: ‘There is a strong case for the Chancellor to create greater leeway around his fiscal rules.

‘This doesn’t cost much, but it doesn’t mean limping from one forecast to the next under constant speculation that policy will tighten again. ‘Ongoing uncertainty is damaging the economic outlook.’

The IFS refused to give an exact figure for how much headroom Ms Reeves should give herself, saying it depended on estimates from the Office for Budget Responsibility.

‘If the OBR produces a much smaller downgrade than many people expect, maybe it would be easier to go back to the £20 or £30bn headroom,’ said deputy director Ben Zaranko.

‘If the OBR actually produces something that looks quite negative, then the size of the consolidation required could perhaps start to look frighteningly large.’

Ms Miller said the Chancellor’s failure to create a large enough buffer for himself in the last budget had exposed him and said the situation facing Ms Reeves was “largely” one of her own making.

‘In choosing to apply her financial rules with such a small margin of headroom, Ms. Reeves would have known that ordinary forecast changes could easily throw her off course,’ he added.

The IFS said greater ‘fiscal consolidation’ (tax rises and spending cuts) would be the ‘simplest way’ to avoid similar challenges in future years.

But while he acknowledged that spending cuts would ‘create challenges’, he acknowledged that tax rises were not straightforward, with Labour’s manifesto ruling out increases in income tax, national insurance or VAT.

The IFS warned against charging ‘large sums of money to a small number of taxpayers’ and said the Chancellor ‘must be brave’ and reform the tax system to be ‘more rational’ and less impactful on economic growth.

This comes after the IFS published its annual ‘green budget’, which sets out the challenges facing the Chancellor each year ahead of the Budget.

The green budget also includes analysis from Barclays which suggests unemployment could rise to 5 per cent in 2026 due to slowing growth and above-target inflation.

Jack Meaning, chief UK economist at Barclays, said: ‘With the right policy decisions, this short-term challenge can be diverted towards a more positive medium-term outlook.

‘If the Chancellor can avoid presenting an inflationary budget, headline price growth will ease significantly in the coming months, allowing the Bank of England to cut interest rates further and support more balanced economic growth for households and businesses.’