Reeves says she was wrong about UK tax needs ahead of election

Chancellor Treasury chief Rachel Reeves said she was wrong to tell British voters ahead of the election that Labor would not announce new tax rises, even though she assured them there would not be a repeat of her first budget in coming years.

During an interview on Sunday (Nov. 3), Reeves was asked to explain June comments when she said she had “no plans to raise any taxes beyond what we’ve already laid out.” Such remarks have come under greater scrutiny after Reeves unveiled a £40 billion ($68.6 billion) revenue package, including some measures such as changes to payroll taxes and inheritance taxes. which were not specifically mentioned in the Labor Party’s election manifesto. .

“I was wrong on June 11,” she told Sky News, explaining that she had underestimated the size of the UK’s budget deficit. “Less than a month after I uttered those words, I was brought into a room by senior Treasury officials and they exposed a huge black hole in the public finances.”

Reeves’ appearance on Sunday morning talk shows in Britain was the latest attempt by the media to sell a budget that included not only the biggest tax hikes in decades but also a huge surge in borrowing. Concerns about the impact of the spending plan on inflation – and therefore the Bank of England’s path to rate cuts – sparked a two-day sell-off in government bonds last week before prices stabilized on Friday.

Her comments on Sunday represented Reeves’ most explicit admission yet that Labor had gone further on tax than she and Prime Minister Keir Starmer had signaled ahead of the July 4 election. Within weeks of taking power, Britain’s first female chancellor revealed what she said was a £22 billion spending gap left by the outgoing Conservative government, raising the stakes for Labour’s first budget in 14 years.

However, Reeves insisted she could avoid announcing another similar spending plan before the next election, despite concerns from some ministers that their departments remain underfunded. Economists predict the chancellor may have to raise taxes again to avoid a return to austerity policies for many government departments at the end of the parliamentary term.

BT in your mailbox

Start and end each day with the latest news and analysis delivered straight to your inbox.

“There’s no need to come back with the same budget,” Reeves told Sky News, adding that she hoped to “wipe the slate clean” with last week’s program. “We’ll never have to do this again.”

Starmer and Reeves will have to contend with a more aggressive opposition after the Conservatives elected former business secretary Kemi Badenoch as their leader. Badenoch indicated during an interview with the BBC that she would seek to regain leadership as the party for lower taxes.

The new Tory leader admitted the party allowed the tax burden to become “too high” during his time in Downing Street. “If we start with the assumption that we can just tax and borrow money to survive, we’ll continue to get poorer, and that’s what’s happening, and we’ve been part of it,” she said a day after ousting former Immigration Minister Robert Jenrick at the national vote of Conservative Party members.

Although Badenoch is the first black leader of a major British political party, she has made it clear that she will not seek to exploit her importance as leader of the opposition. In fact, she rejected Reeves’ own attempts to highlight her status as the first female chancellor in 800 years, calling it a “very low glass ceiling” in a country that has had three female prime ministers.

For her part, Reeves acknowledged there would be “losers” from her first budget following warnings that businesses would likely pass on tax increases to workers through lower wage growth and higher prices. Office for Budget Responsibility (OBR) forecasts showed that tax’s share of the economy would rise to its post-World War II peak.

Reeves also said she was “not satisfied” with the expected acceleration in budget growth. The OBR forecasts growth will rise to 2 per cent next year before slowing to pedestrian levels. That was little changed from March forecasts from the budget watchdog under the previous Conservative administration, and even suggested weaker growth from 2026.

“This is not the height of my ambition,” she said. “We still have a lot to do to develop our economy.” BLOOMBERG