UK chancellor says she had not known true picture of public finances but no need to increase taxes further after budget
Rachel Reeves has admitted she was wrong to say before the election that no major tax rises would be needed, but promised there was “no need to increase taxes further” after last week’s budget raised £40bn.
The UK chancellor said she had not known the true picture of the “huge black hole in public finances” left by the Conservatives, which the government says amounted to £22bn. “I was wrong on June 11, I didn’t know everything,” she said.
Reeves said there was no requirement to come back with another big tax-raising budget, after increasing employer national insurance contributions, raising capital gains on most assets, making inheritance tax changes, and charging VAT on private school fees.
Speaking on Sky’s Trevor Phillips on Sunday programme, Reeves said: “I’m not going to be able to write five years’ worth of budgets on this show today, but … there’s no need to come back with another budget like this.We’ll never need to do that again.
“We’ve now set the spending envelope for the remainder of this parliament, we don’t need to increase taxes further. We need to do two things now: we need to reform our public services to make sure they work better and we need to grow our economy.”
She also gave an “absolute commitment” that the government would stick to its manifesto pledge for five years that there would be no tax increases on “working people”, saying Labour had “wiped the slate clean” after the Tories’ “mismanagement”.
Reeves said: “It’s now on us. We’ve put everything out into the open, we’ve set the spending envelope of this parliament, we don’t need to come back for more, we’ve done that now, we’ve wiped the slate clean.”
After delivering her first budget on Wednesday, Reeves has been defending her decisions to increase employer national insurance in particular, with some GPs’ surgeries, social care providers and charities facing higher bills for employing staff.
On the BBC’s Laura Kuenssberg programme, Reeves was pressed on whether it had been misleading to say she would not to raise national insurance but the chancellor said the Labour manifesto made clear that it was a pledge not to raise that tax on working people – not the employer element.
Asked about the concerns of GPs, charities and others, she said: “I’m not immune to their criticism but we’ve got to raise the money. For GPs I would say that Wes Streeting, the health secretary, will be setting the allocations for the budgets.”
Reeves’s budget has been well received by experts at the International Monetary Fund (IMF), and the markets have largely stabilised after the pound fell and gilts rose slightly in the aftermath.
It was reported over the weekend that the chancellor will soon turn her attention to how to kickstart growth, with a Mansion House speech looking at changes to unlock investment from public pension funds. The Office for Budget Responsibility forecasts only low or stagnant growth over the course of the parliament.
Reeves is also facing the possibility of a legal challenge from Unite, the trade union and major Labour donor, which said it was planning to launch a judicial review.
Unite has sent a pre-action protocol letter to Liz Kendall, the secretary of state at the Department for Works and Pensions (DWP), asking the government to reverse the removal of the winter fuel payment and repeal the regulations introduced in August 2024.
Unite said it believed the government had acted unlawfully and its action would have a terrible effect on millions of older people in society and would be likely to cause an increase in cold-related deaths.
