‘We all have to do our bit’ – Reeves primes Brits for tax hikes
Rachel Reeves has refused to rule out hiking taxes on millions of Brits as she said everybody will have to “contribute” to fix the UK economy.
At a speech on Tuesday, the Chancellor said this year’s Budget would look to address the low productivity, curb inflation in order to prompt fresh interest rate cuts and focus on getting debt levels down to reduce borrowing costs.
She refused to get drawn on the taxes she might raise at the Budget but said that the country faced “big challenges”, with many emerging since last year’s £40bn tax hike on businesses and other groups across the UK.
“When I was appointed Chancellor, people put their faith in me to take our country forward, not to be swayed by political convenience, not to always do what is popular,” Reeves said.
“I will continue to deliver on the priorities of the British people, cutting NHS waiting lists, cutting the national debt and cutting the cost of living.
“If we are to build the future of Britain together, we will all have to contribute to that effort. Each of us must do our bit for the security of our country and the brightness of its future.”
Reeves added that there was a “reward for getting these decisions right”, with a further suggestion that she would create a larger headroom to “withstand global turbulence” and to allow the government to be “freer to act when the situation calls for it”.
Rachel Reeves signals tax hikes
The unusual speech came three weeks before Reeves delivers her Budget where she could face a £30bn fiscal hole.
The Office for Budget Responsibility (OBR), the fiscal watchdog, is expected to downgrade productivity trend forecasts, adding to costs faced by the Chancellor.
There have been several rumoured tax over the last few months, with some think tanks and business leaders calling on Reeves to break a Labour Party manifesto commitment and raise income tax in order to generate higher levels of revenue.
The Chancellor said she wanted Brits to “understand the circumstances we are facing” and the “principles guiding my choices”.
She said the speech was the “courteous thing to do” before a difficult set of announcements later this month.
“I think it’s important that people are honest and as I said I think everyone can see this year has thrown many more challenges our way.”
Has Reeves fixed the foundations?
While Reeves held last year’s tax raid “fixed the foundations”, she said: “Since that Budget, the world has thrown even more challenges our way. The continual threat of tariffs has dragged on global confidence, deterring business investments and dampening growth.
“Inflation has been too slow to come down, as supply chains continue to be volatile, meaning the costs of everyday essentials remain too high and the cost of government borrowing has increased.”
Her speech in Downing Street also pointed to Labour’s commitment to reform the welfare system, though it is unclear whether changes will come ahead of this Budget.
“The Prime Minister, the secretary of work and pensions and this whole government are committed to reforming our welfare state. That is not a system that counts the costs of failure, but one that invests in success and protects those who need it most.”
“There is nothing progressive about refusing to reform a system that is leaving one in eight young people out of education or employment.”
Reeves also took aim at the Tories and Reform for their economic plans that she said would lower public investment and not stabilise the UK economy.
The Tories pledged to make £47bn in savings in order to fund tax cuts, including the abolition of the stamp duty on primary residences. Nigel Farage meanwhile pledged to make spending cuts before cutting taxes if Reform were elected into government.
“My opponents will tell you that they could do more. Reform UK promise savings from our public services, and yet in Kent County Council and councils they run across Britain, apparently they can’t find a single penny, and instead going to increase council tax for more than 2m people.”
Shadow Chancellor Mel Stride said the speech represented an admission that Reeves’ “first Budget was a failure”.
“With an emergency press conference, she is all but confirming what many feared, higher taxes are on the way,” Stride said.
“If Rachel Reeves breaks her promises yet again, Keir Starmer must take responsibility and sack her. The country needs a Chancellor with a plan and a backbone.”
Reform deputy leader Richard Tice said: “Rachel Reeves has today confirmed what we all knew – she’s going to hammer working people with even more tax rises.
“Instead of cutting waste and spending, deregulating and optimising for growth, we are just getting more of the same.”
Bond traders took a relatively positive view of the speech given Reeves said her fiscal rules were “iron clad”.
The yield on 10-year gilts dropped by four basis points while the yield on 30-year UK government bonds dropped by five basis points, reflecting lower borrowing costs for the government.