Labour grandee warns Reeves over ‘very worrying’ tax raid which would raise billions: Budget 2024 latest

Keir Starmer has denied misleading the public over tax rises in the Budget after he suggested “working people” did not make money from property or shares.

The prime minister also rejected claims he had waged a “war on middle Britain”.

At a press conference at the end of the Commonwealth heads of government meeting (Chogm) in Samoa on Saturday, the prime minister was asked whether he was “plotting a war on middle Britain”.

“No. Let me clear about that,” he said. “What we’re doing is two things in the Budget.

“The first is fixing the foundations, which is dealing with the inheritance that we’ve got, including the £22 billion black hole. We have to deal with that. In the past leaders have walked past those problems, created fictions, and I’m not prepared to do that.”

Asked whether he had misled the public in the Labour manifesto, he added: “No, we were very clear about the tax rises that we would necessarily have to make, whatever the circumstances, and you’ve listed them there, and I listed them, I don’t know how many times in the campaign.

“We were equally clear in the manifesto and in the campaign that we wouldn’t be increasing taxes on working people, and spelt out what we meant by that in terms of income tax, in terms of NICs [National Insurance contributions] and in terms of VAT and we intend to keep the promises that we made in our manifesto.”

New research by the Joseph Rowntree Foundation ahead of next week’s Budget shows the ongoing “black hole” in family finances, particularly affecting the poorest families, with many already £700 worse off than they were five years ago.

They are calling on the government to act on the findings and take action on hardship at the upcoming event.

Katie Schmuecker, Principal Policy Adviser at JRF, says: “The Budget on October 30th is not just a book-balancing exercise, it is a statement of political intent.

“The Labour manifesto described the need for emergency food parcels as a moral scar on our society, so it is inconceivable that there will not be a serious plan to protect families from hardship this winter and beyond.

“Last year Labour condemned the fact that 1 million children experienced destitution in a single year as a damning indictment of the Conservative government. A Labour government now has the power to take urgent action and people are looking to them to act.”

In a manifesto pledge, Labour said it will announce more details on plans to close the private equity tax loophole in the October Budget.

Due to the ‘carried interest’ law, private equity fund managers pay only 28 per cent tax on their income, which is treated as capital gains. This was the result of a successful lobbying campaign in 1987.

Labour has vowed to change this, making managers pay the 45 per cent higher rate of income tax. It is estimated the change will raise around £600 million a year with just a few thousand people affected.

Rachel Reeves has announced a change to the fiscal rules ahead of next week’s budget, allowing her to borrow billions more each year.

The chancellor today confirmed her rules will “make space for increased investment in the fabric of our economy”, amid widespread expectation she will change the way debt is measured.

Veteran Labour politician Lord Blunkett has expressed his concerns over rumoured plans to reform pension tax relief, extending employers’ national insurance contributions.

Writing in the times, he said: “The widespread reporting of a possible extension of employers’ national insurance in next week’s budget is very worrying. It is one thing to increase the rate of national insurance, and quite another to levy this on employer pension contributions.

“As the former work and pensions secretary who signed off, with Tony Blair and Gordon Brown, pensions auto-enrolment — which recognised the genuine crisis, for generations to come, in maintaining living standards in retirement — I would advise strongly against this.

“We need more employers contributing more than the basic 3 per cent and, with it, the corollary of savings and investment, not less. I sincerely hope the rumours are well wide of the mark.”

A week from now, the chancellor will be rehearsing for her first Budget. With rises in the most significant taxes – such as income tax and VAT – ruled out, Air Passenger Duty (APD) looks ripe for an increase, writes Simon Calder.

Rachel Reeves’ Budget is a make-or-break moment for Sir Keir Starmer’s government, potentially sparking a decade of national renewal – or sowing the seeds of Labour’s downfall.

The prime minister’s poll ratings are at rock bottom after just over 100 days in charge, and the much-hyped “tough choices” to be unveiled on October 30 will likely do little to help boost his appeal.

Labour is expected to extend an income tax measure that has been described as a “stealth tax” at the upcoming Budget as more people are set to pay higher rates.

Officials have said Rachel Reeves is looking to extend the freeze on income tax thresholds, which has dragged millions of earners into paying higher rates of income tax since 2021.