Chancellor's Stark Warning on Tax and Spending
Chancellor Rachel Reeves has delivered her strongest indication yet that she may break Labour's flagship manifesto promises on tax, suggesting the government's financial situation is far worse than anticipated.
In a revealing interview on BBC Radio 5 Live, Ms Reeves argued that the only way to maintain pledges not to increase income tax, National Insurance or VAT would be to slash investment - something she has categorically ruled out doing.
A Growing Fiscal Crisis
The Chancellor revealed that the government's fiscal position is 'significantly worse' than when Labour's election manifesto was drafted, leaving her with limited options to address a financial black hole estimated at between £20 billion and £40 billion.
When pressed on whether she was confirming an income tax increase would be announced in her November 26 package, Ms Reeves stopped short of definitive confirmation but notably did not deny the possibility, stressing that final decisions remain under consideration.
Such a move would represent the first increase in the basic income tax rate since 1975, marking a dramatic departure from Labour's core election commitment.
Labour Backlash and Historical Parallels
The strong hints emerging from the Treasury have triggered alarm among Labour MPs, with former minister Cat West drawing direct comparisons to the Liberal Democrats' catastrophic tuition fees U-turn in 2015.
Ms West told the BBC's Westminster Hour: 'If I were Rachel, I think I wouldn't be breaking the manifesto promise. I just think back to the Liberal Democrats and university fees... That's how I won my seat. Those big ones, they do come back to haunt you.'
Cabinet ministers have reportedly been privately expressing concerns about the potential political fallout should Ms Reeves and Prime Minister Keir Starmer choose to break their tax pledge.
Labour's recently-installed deputy leader Lucy Powell emphasised last week that it was 'really important' to stick to manifesto promises, while left-wing MPs have been pushing for alternative measures targeting wealthier individuals.
In a rare pre-Budget speech last week, Ms Reeves admitted that everyone will have to 'contribute' to stabilising the government's finances, citing a combination of Brexit, Conservative management, Covid, the Ukraine war and President Trump's tariffs as contributing factors.
Despite Tory calls for her resignation over the potential breach of promise, Ms Reeves insisted she was 'not going to walk away because the situation is difficult'.
