Shadow Chancellor Mel Stride has said he would raise income taxes if he were in Rachel Reeves’ position, facing a £30bn black hole in the public finances.
Speaking at a fringe event at the Tory party conference in Manchester, Stride said raising income taxes was the “cleanest” tax hike option available.
His comments will likely raise some eyebrows among Tory officials after the party made a pledge to make £47bn savings a year through cuts to the spiralling welfare bill and civil service headcounts.
When asked which taxes he might raise to plug a fiscal hole, Stride conceded: “If I was in exactly her position and I had to deal with tax, and I was down the end of the spectrum where the black hole was really big, I would probably go for income tax.
“[That’s] on the basis that VAT would be inflationary, and we’ve got a sticky inflation problem which is keeping interest rates higher for longer than we should otherwise be facing.
“I wouldn’t want to be in that position but that’s the cleanest thing to do.”
Stride’s tax comments irk Tories
Leading economists at think tanks and across the City have said that raising income taxes would be the least damaging tax hike Reeves could introduce.
The Resolution Foundation, which was once the workplace of Treasury ministers Dan Tomlinson and Torsten Bell, called for Reeves to raise government revenue by cutting national insurance and raising income taxes.
Opposition parties have pointed to Reeves’ handling of public finances as being at fault for what may be a £30bn fiscal hole, according to several forecasters.
Labour MPs have meanwhile claimed the Office for Budget Responsibility (OBR)’s scheduled productivity forecast reviews could have been conducted while the Tories were in office.
In a later fringe event hosted by the TaxPayers’ Alliance, one of Stride’s colleagues in the shadow Treasury team, Richard Fuller, disagreed that income taxes should be raised to plug a fiscal hole.
Fuller said: “The answer to the long term problems of the UK is not to tax people. The tax take is already too high.”
Fuller and shadow business secretary Andrew Griffith also called for the Tories to be more united in their messaging to hold firm on proposed reforms to the public sector, which would include a headcount reduction of over 100,000 across Whitehall.
‘Scars of austerity’
Much of the discussion at the event centred around how the UK electorate could be persuaded that spending cuts were necessary, with the scars of “austerity” posing a threat to Tories’ credibility with the public.
Fuller said that a fiscal crisis as in the 1970s could represent a “breakthrough” with the public but he added that politicians needed to have the “courage” to talk about improving public sector productivity and be able to explain measures to concerned constituents.
Former Brexit negotiator David Frost said he was “disappointed” that Stride made the comments on raising income taxes, adding later that it was a “pity” that any tax hikes were being contemplated.
He also hit back against Tory attacks on Nigel Farage as a “socialist” which could see voters lose further trust in the party.