Shadow chancellor Rachel Reeves has ruled out increasing income tax or National Insurance if Labour wins the general election, but warned of “difficult decisions” ahead. In an interview with the BBC’s Laura Kuenssberg, she said she would not put forward “unfunded proposals” and was under “no illusion about the scale of the challenge” facing the next government.
Reeves promised there would be no return to austerity, with fully costed commitments to boost frontline services including the NHS, additional police and teachers. Labour plans to fund these by ending the VAT exemption for private schools and extending the windfall tax on energy firms, as well as raising £5bn a year by tackling tax avoidance and £2.6bn by closing non-dom loopholes.
The Conservatives responded by claiming Labour’s spending pledges would create a £38.5bn black hole, equivalent to a tax rise of £2,094 per working family. Economic Secretary Bim Afolami said this showed Labour had “no plan to cut taxes” and would “come after yours” when they run out of money.
The Institute for Fiscal Studies has issued a stark warning that more tax rises or cuts to public services lie ahead, whoever wins on 4 July. Reeves declined to rule out rises in other taxes such as VAT or capital gains, but insisted nothing in Labour’s plans required further increases. She also said there would be a review of defence spending costs before committing to a timetable for reaching 2.5% of national income.
Unprotected areas like local council services and justice could face cuts if Labour sticks to its rule not to borrow for day-to-day spending. Reeves promised rapid investment in the NHS and teacher recruitment, but acknowledged the need to turn around the UK’s “dire economic performance”.
