Rachel Reeves has suggested tax increases will be necessary in the autumn budget to avoid austerity.
The chancellor, who will unveil the budget on 30th October, stressed that taxes on “working people” will be unaffected. Labour has repeatedly insisted it will not raise taxes on working people — having referred specifically to income tax, national insurance and VAT in the party’s election manifesto.
But Reeves says that the Treasury does need “to look at other taxes to make sure that the sums add up”. In total, the chancellor is said to be seeking to raise up to £40 billion from tax rises and spending cuts.
Senior Labour figures, including Reeves and prime minister Keir Starmer, have refused to rule out increasing employers’ national insurance contributions in the upcoming budget.
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Speaking to BBC Radio 5’s Matt Chorley from Downing Street, Reeves said: “We go into this budget with a number of challenges, the £22bn black hole just this year, in the public finances, the unfinanced company compensation schemes, for example, on infected blood and Horizon, it’s really important that we honour but they weren’t in the forecasts from the previous government.”
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She accused the previous government of having “baked in austerity to our public spending settlements in the years to come.”
“All of those things mean that, yes, we do need to find additional money. But I’ve also been very clear that those taxes on working people, income tax, national insurance and VAT, they’ll not be rising.”
Reeves also confirmed that spending deals have been struck with all departments ahead of the budget, saying all the chief secretary’s “balloons” have been popped.
The remark was a reference to the tradition that, while negotiating the budget, balloons are hung in the office of the chief secretary to the Treasury to represent departmental spending deals.
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“This is not a tradition started by this chief secretary [Darren Jones], but by a previous chief secretary”, Reeves said. “I’m not sure how many ago, where, at the beginning of the process, balloons are blown up and stuck to the wall in the office.”
She added: “There are no balloons left in the chief secretary’s office — the balloons have been burst.”
There had been reports of tension between cabinet ministers and the Treasury over the spending settlements for the budget, with a series of cabinet ministers said to have written letters to the prime minister protesting against the cuts planned for their departments.
Those reported to have penned letters include deputy PM and housing secretary, Angela Rayner, transport secretary Louise Haigh and justice secretary Shabana Mahmood.
Speaking to the BBC, the chancellor has said she was “sympathetic towards the mess” her cabinet colleagues have faced since entering government.
Reeves insisted it is “perfectly reasonable” that ministers set out their case to No 10 and the Treasury ahead of the fiscal event, and warned problems cannot “just be magicked away”.
She added: “I’m very sympathetic towards the mess that my colleagues have inherited.
“I understand those challenges, but also my colleagues understand the challenges that we face as a government in making sure that the sums.
“It is perfectly reasonable that cabinet colleagues set out their case, both to me as chancellor and to the prime minister, about the scale of the challenges that they find in their departments. It’s been a really constructive process.”
Josh Self is Editor of Politics.co.uk, follow him on X/Twitter here.
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