Downing Street has refused to rule out breaking Labour manifesto tax pledges not to raise income tax, national insurance for workers or VAT, in a further indication that the government could look to raise revenue through one of the three big taxes.
The Labour Party vowed not to raise national insurance, VAT or income tax rates at this year’s Budget but they have since faced calls to breach commitments to raise significant sums of revenue without inflicting damage on businesses and the wider UK economy.
In a press briefing after Prime Minister’s Questions, a No 10 spokesperson refused to comment on whether the Chancellor was considering breaking away from the Labour manifesto.
“I’m not going to speculate on the Budget but as the Chancellor said today, the numbers will always add up.”
The spokesman also pointed to comments made by senior ministers at the time of the Labour Party conference a fortnight ago.
The likes of Rachel Reeves, chief secretary to the prime minister Darren Jones and Starmer then said the manifesto “stands” and that decisions would be taken in due course.
Jones also said he was not “ruling anything out” or “ruling anything in”.
Top City economists and think tanks including the Institute for Government have urged the government to U-turn on its manifesto tax policies in order to reduce the damage on the UK economy.
Reeves admits tax hikes are being considered
On Wednesday morning, Reeves publicly admitted that she was considering making tax hikes in order to plug a fiscal hole, which could amount to £30bn according to independent forecasters and media reports.
In her interview with Sky News, Reeves said: “I was really clear during the general election campaign and we discussed this many times that I would always make sure that the numbers add up.
“Of course, we’re looking at tax and spending as well, but the numbers will always add up with me as Chancellor. We saw just three years ago, what happens when a government, where the Conservatives lost control of the public finances, inflation and interest rates went through the roof?”
Reeves pointed to a supply side review being undertaken by the Office for Budget Responsibility (OBR), which looks set to downgrade productivity and wipe out the Chancellor’s £9.9bn headroom.
U-turns on welfare savings before the summer and higher borrowing costs due to volatile bond markets are also set to add to costs at the Budget.
A spokesman said on Wednesday afternoon: “What the chancellor said was that I will always make sure that the numbers add up. And, of course, challenges are being thrown our way, whether that’s geopolitical uncertainties, the conflicts around the world, the increased tariffs and barriers to trade. “
“And now this review, looking at how productive our economy has been in the past, they’re projecting that forward.”