Rachel Reeves has admitted that she was ‘wrong’ to tell voters during the election that no big tax hikes would be needed. Footage captured on the election trail shows Reeves telling people that taxes would not be put up. However, she acknowledged that she was mistaken in making those statements. This admission comes after the Chancellor announced her first Budget, which included measures such as a boost to minimum wage workers and a National Insurance hike. Reeves claimed that the government faced a £22 billion spending black hole inherited from the Conservative government, with the Conservatives labeling the figure as ‘fiction.’
One key moment during the election campaign was on June 11 when Reeves stated that she would not need to raise taxes beyond what was already set out in the Labour manifesto. Reeves explained that her change of stance was due to not having all the information about the state of the public finances. The tax U-turn was prompted by a dispute over the size of the financial black hole. The Office for Budget Responsibility revealed that it did not receive all funding plans from the previous Conservative government, which led to a lack of information about additional spending pressures. Economists have raised concerns about potential future tax hikes and the need for additional funding to protect unprotected departments from cuts.
Before the Budget, Reeves assured that the measures would not tax ‘working people’ and vowed that there would be no need for another Budget like the first one. The Chancellor will rely on economic growth to avoid further tax hikes, but experts have cautioned that growth is likely to remain low over the next five years. Some changes in the Budget, such as cuts to inheritance tax relief and a national insurance increase, have faced backlash. However, other groups, such as carers, workers on minimum wage, and pubgoers, emerged as winners with benefits like increased earnings and lower costs for pints. Kemi Badenoch, the new leader of the Conservative Party, criticized Labour’s decisions and promised to reverse some of the tax changes.
Conservative officials have accused Labour of breaking promises and making dishonest choices that will negatively impact people. They argue that Labour’s decisions, such as imposing a tax on working people and introducing a family farm tax, were not included in their manifesto. The Conservatives claim that Labour was not honest with voters during the election and that the consequences of the Budget will make people poorer. These criticisms highlight the ongoing debate over the government’s fiscal policies and the implications of the Budget. Overall, the Budget measures, tax hikes, and spending plans will continue to be scrutinized and debated in the coming months.
