Starmer refuses to rule out VAT rise
Prime Minister Keir Starmer has refused to rule out any potential rises to VAT as he reinforced his commitment to Labour’s manifesto pledges in a new interview.
In an interview with BBC’s Laura Kuenssberg, after being pressed on potential changes to VAT, Starmer said: “The manifesto stands. We made commitment in that manifesto and the manifesto stands.”
“We put that manifesto before the electorate, we got elected, and the manifesto stands.
The Labour government has been under increasing pressure to move away from both its manifesto promises and fiscal rules in the upcoming Autumn Budget, which ruled out increasing rates of income tax, national insurance and VAT.
The Treasury is scrambling to fill a £20bn black hole in public finances, leading them to consider more potential tax rises in the looming Autumn Budget.
According to modelling from HMRC, raising the standard rate of VAT by one percentage point, could raise £8.8bn in the 2026/27 financial year.
However, there are talks Reeves is considering scrapping VAT on fuel bills in order to reduce costs and ease the cost of living.
She told cabinet members earlier this month that “all options were on the table”, which is understood to include lowering the 5 per cent VAT on domestic energy bills to zero.
This would save consumers about £86 a year but would cost the Treasury an estimated £1.75bn a year, based on the current energy price cap.
Union urges for rule changes to solve problems
Starmer also refused to discuss what other changes may be introduced in the Budget.
He said: “I’m not going to go through the details of the Budget.”
“Obviously, it’s two months away and no PM or chancellor would sit here and indicate what may or may not be in the Budget.”
However, Unite general secretary, Sharon Graham, cited the Budget as a “critical point” for whether Unite members choose to disaffliate, saying that the “time is getting close to make a choice”.
She told Sky News: “Those fiscal rules need to be changed. Other countries are doing it. We should stop dancing around our handbag and do that. If that Budget is essentially nothing, it’s insipid.
“I think we’ve got a real problem our hands, because without the money to make the change, then nothing is going to change.”
Space to carry out promises
Starmer also said he needed “space” to make good on the promises he made in last year’s general election, as the public’s frustration towards the government continues to grow.
The Prime Minister said: “I will be judged at the next election on three things, I think, more than anything else,”
“One, have we improved living standards? Do people genuinely feel better off?
“Two, have we improved public services? Is the NHS in a better place and people can feel it?
“And three, do people feel safe and secure in their home, in their neighbourhood, and that their country is secure?”
Starmer added he would be judged at the end of his five-year mandate, but he needs space to “do those three things above all else”.