Rachel Reeves ducks ‘speculation’ despite tax pledge confusion
Chancellor Rachel Reeves ducked questions about her Autumn Budget plans despite growing confusion over tax pledges and definitions of “working people”.
In an interview on Monday, the chancellor reiterated the government’s pledge not to raise the rates of income tax, national insurance or VAT.
But Reeves declined to comment on whether she would introduce a new wealth tax when asked by reporters, while avoiding the thorny issue of providing a definition of “working people”.
“We haven’t even set the date for the budget yet, so please forgive me if I’m not going to speculate about what might happen at an event that we haven’t even decided a date on yet,” Reeves said.
“But we’ve been really clear in our manifesto about the taxes that we won’t increase, and we’re not going to increase the taxes that working people pay, their income tax, their national insurance and their VAT, because I do recognise the struggle that ordinary working people have faced these last few years with the cost of living.”
Working out what a working person is
In morning interviews, her deputy Darren Jones took a similar tone as he said the Labour government would stick by manifesto commitments.
But when asked for a definition of “working people”, he said that would represent “protecting incomes in payslips”.
It contrasted with transport secretary Heidi Alexander’s definition on Sunday morning that “working people” applied to “people on modest incomes”.
Jones played down Alexander’s comments as he said that modest income definitions would vary between people.
“The very clear policy commitment we have as a government, that was in our manifesto going into government, was the headline rate of income tax and employee national insurance that people pay in their payslip alongside VAT,” he told LBC.
Political commentators, including Tory peer Lord Moynihan, have warned that changing VAT exemptions could be on the table, with Jones’ comments on the “headline rate” of taxes also prompting predictions by leading economists that the government would extend the controversial freeze on income tax thresholds.
The move to prolong the freeze on income tax thresholds, otherwise known as fiscal drag or a “stealth tax“, was not ruled out by Keir Starmer last week.
Former Conservative Party leader hopeful Tom Tugendhat has raised the idea of taxing property, with exemptions having “distorted UK capital allocation” between generations.
Rachel Reeves’ headroom problem
City analysts widely predict the government will have to raise around £30bn in taxes to restore Rachel Reeves’ £9.9bn headroom, with a hole in public finances left by U-turns on welfare reforms, expected downgrades to growth and higher borrowing costs due to volatile bond markets.
The Chancellor has also backed her “iron-clad” fiscal rules setting a limit on borrowing projections but reports suggest she could adopt IMF-backed changes to make the Office for Budget Responsibility (OBR) only deliver one fiscal forecast a year.
OBR member David Miles said last week the move to “simply just raise more and more tax revenue is definitely limited”, damaging UK growth prospects.