Keir Starmer refuses to rule out £40bn tax raid
Keir Starmer has refused to rule out that this year’s Autumn Budget will be softer than the tax raid seen last year, which targeted business and homeowners in raising £40bn extra in receipts.
The prime minister has previously said that the UK cannot “tax [its] way to growth” while under-pressure Chancellor Rachel Reeves vowed to not increase taxes on the scale seen last year.
But at a press conference unveiling the government’s 10-year NHS plan, Keir Starmer declined to comment on how much tax the government would have to raise later this year to fill costs left by U-turns on welfare reforms and bailing out fledgling businesses.
When asked about whether City analysts were right to suggest the chancellor would have to announce similar levels of tax hikes seen last year, the prime minister said that no cabinet minister “is going to write a budget in advance”.
“We did really tough stuff in that Budget of last year, we made sure to stabilise the economy and we took the big and heavy decisions early on.”
“We’ve done a lot of the heavy lifting, we’ve done a lot of the hard yards and the result of that is we’re turning our economy around.”
The prime minister told reporters they would receive the same response if another party was in power.
Rachel Reeves separately admitted she had a “tough day” on Wednesday when she was seen crying during PMQs, adding that her job was to support Keir Starmer in parliament despite “personal issues”.
But the government will continue to face questions over her future as Chancellor, particularly after calls from business leaders for no extra taxes to be put on them.
Tax hike fears
The Treasury now faces a £5bn hole in public finances after they partly re-introduced winter fuel payments and delayed reforms to personal independence payments (Pips) until after a review is published later this year.
City analysts have also warned that the higher cost of borrowing and lower growth projections could erode Rachel Reeves’ small headroom of £9.9bn.
Bond markets appeared to panic yesterday upon seeing a tearful Rachel Reeves not receive immediate backing by the prime minister over fears a new Chancellor with a “looser” approach to borrowing would be brought in.
Gilt yields have since come back down after Keir Starmer told reporters the Chancellor would remain in her position for “a very long time”.
City analysts have warned that the government could raise taxes by as much as £20bn this year to restore her headroom.
The National Institute of Economic and Social Research (NIESR) has separately suggested that Rachel Reeves may have to build a larger fiscal buffer than £9.9bn if she wishes to “rebuild credibility”.