Rachel Reeves rules out surprise UK tax rises

Rachel Reeves has said a Labour government would not raise taxes beyond a handful of measures she has already set out, limiting the party’s room for manoeuvre if it wins the UK general election on July 4.

The shadow chancellor on Tuesday also ruled out the idea of a swift Budget, hinting that the first major fiscal event under a Labour government would not occur until September at the earliest.

The main opposition party, which is guarding a poll lead of about 20 points, is keen to project its economic credentials and win over British business.

Following her first big speech of the election campaign at a Rolls-Royce factory in Derby, Reeves was asked whether Labour would need to put up any taxes to ease pressures on Britain’s public services.

“There are no additional tax rises needed beyond the ones that I’ve said,” she added. 

Her comment marked a hardening of Labour’s position on tax rises as the party grapples with questions over how it would address spending priorities from social care to struggling councils and overflowing prisons. 

On Sunday she ruled out rises to income tax or national insurance, the two main taxes levied on people’s earnings. 

Sir Keir Starmer, Labour leader, said on Monday that all of his party’s policies were fully costed. “We have gone through all of our plans and none of them require us to raise taxes,” he said.

But Reeves has gone further with her promise of “no additional tax rises”.

She said Labour’s only increases in tax would be the ones the party has already set out. Such measures include extending the windfall tax on energy companies’ profits, imposing VAT on private school fees and ensuring private equity bonuses are “taxed appropriately”. 

The Conservative government has pencilled in years of fiscal restraint after the election, which would mean real-terms cuts to non-protected government departments including transport, local government and justice. 

Last week the Institute for Fiscal Studies said the next government would have to choose between cutting spending, raising taxes or borrowing more to address a hole in Britain’s public finances.  

“The parties might well be reluctant to tell us which of these they would opt for upon taking office. That doesn’t mean that we should refrain from asking them,” the think-tank said.

Reeves also signalled that a Labour government would not deliver a Budget until mid-September at the earliest.

She said an emergency “fiscal event” before the summer would not allow the Office for Budget Responsibility, the fiscal watchdog, to prepare accompanying forecasts. 

“The OBR requires 10 weeks’ notice to provide an independent forecast ahead of a Budget and I’ve been really clear that I would not deliver a fiscal event without an OBR forecast,” she said.

Labour also won the backing of 120 business executives in a letter to The Times this week, an apparent endorsement of the party’s promise to restore “stability” to the UK economy if it wins the election.

In their letter, the current and former business chiefs endorsed Labour and criticised the Conservatives’ handling of the economy, which they said had been “beset by instability, stagnation and a lack of long-term focus”. 

Signatories included Andy Palmer, former chief executive of carmaker Aston Martin; John Holland-Kaye, former chief of Heathrow airport; Andrew Higginson, chair of retailer JD Sports; and Charles Harman, a former vice-chair at JPMorgan Cazenove. 

Reeves said in her speech that Labour had changed for good and would run Britain as a “pro-business, pro-worker” party if it won the election.