Keir Starmer opened the door to breaking his manifesto pledge yesterday as he refused to rule out hiking income tax, national insurance or VAT in the Budget.
During Prime Minister’s Questions yesterday, Sir Keir failed to repeat his mantra that the promise made to voters at last year’s election still ‘stands’.
In worrying developments for millions of workers, he also refused to rule out extending the freeze on the personal tax allowance threshold, which drags more earners into paying income tax.
Today – the anniversary of last year’s Budget – Tory leader Kemi Badenoch will say Rachel Reeves must be sacked if she raises tax this autumn.
After her £40billion tax grab Budget a year ago, the Chancellor promised she would not be ‘coming back with more borrowing or more taxes’.
But there is mounting speculation, fuelled by the Prime Minister yesterday, that she is actively considering an income tax rise next month to plug a black hole of £20-30billion, thanks to rising borrowing costs and U-turns on policies such as welfare reform.
Last night it was reported that the Chancellor could raise income tax by 2p.
There are also fears that Ms Reeves could target pensions, property and landlords to raise money – with a mansion tax among the ideas being mooted.
Mrs Badenoch will say: ‘Nobody voted for high taxes and out-of-control spending, but that’s what they’re getting from this weak Prime Minister.
‘The British public deserve a government with the backbone and the plan to deliver a stronger economy. If Rachel Reeves breaks her promise and puts up tax, she must get the axe.’
Labour’s general election manifesto contained a promise that the party would not raise national insurance, income tax or VAT.
In recent weeks, the Prime Minister has refused to repeat the pledge, but has claimed the manifesto ‘stands’.
However, yesterday, he dodged questions on whether he still stood by that commitment.
Asked by Mrs Badenoch what had ‘changed in the past four months’, Sir Keir said no Prime Minister or Chancellor would ever set out their plans in advance.
He then pointed to figures from the Office for Budget Responsibility (OBR), which has delivered a worse-than-expected cut to the UK’s productivity outlook.
A report in The Financial Times this week revealed the OBR is expected to deliver an even bigger cut of 0.3 percentage points at the Budget on November 26.
The Prime Minister also evaded a question on whether he could guarantee there would be no extension to the freeze on the personal allowance threshold.
Sir Keir’s press secretary later declined to say the Labour manifesto still ‘stands’ on not raising VAT, income tax or national insurance – and blamed the productivity figures on Brexit.
It came as polling by More in Common found a majority of Britons (55 per cent) believe it would be unfair to blame economic issues on Brexit, compared with a third (32 per cent) who thought that it is fair to do so.
And 52 per cent think it is unreasonable for the Chancellor to continuously blame incoming tax rises on Brexit, compared with 26 per cent who think this is reasonable.
Businesses are also anxious about tax hikes as they continue to feel the pain from the last Budget.
Figures from accountants S&W showed 66 per cent of firms have cut staff or plan to do so after the Chancellor’s £25billion employer national insurance raid.
Meanwhile, former Bank of England rate-setter Michael Saunders warned the Chancellor must address long-term challenges facing the economy.
Mr Saunders, now at consultancy Oxford Economics, backed an increase in income tax but also called for billions to be slashed from health and welfare spending – but doubted such measures would be taken.
‘There seems to be little urgency to address longer-term challenges,’ he said. ‘It seems politically easier to try and muddle through and hope something turns up.’
