Chancellor Rachel Reeves is looking to make tax rises and spending cuts to the value of £40bn in this month’s Budget, government sources have told the BBC. At a political cabinet meeting on Tuesday, Reeves told ministers that filling the “£22bn black hole inheritance from the previous government” would only be enough “to keep public services standing still”.
Reeves is now drawing up plans to find £40bn in order to avoid real-terms cuts to departments, sources say, as first reported in the Financial Times and the Times.
Reeves warned ministers there would be “difficult decisions on spending, welfare, and tax” to come in her Budget this month. The chancellor is finalising details of her first Budget, to be announced on Wednesday 30 October.
She recently said there would be “no return to austerity” under this government and promised a boost to government investment, designed to kickstart growth.
The chancellor is setting herself a borrowing rule which means all day-to-day spending should be funded from taxes raised, not from borrowing.
It is this rule which is binding the government’s hands, and why they are seeking some welfare savings as well as a series of tax rises at the Budget.
A HM Treasury spokesperson said: “We do not comment on speculation around tax changes outside of fiscal events.”
In an interview with BBC Breakfast on Tuesday, the Prime Minister, Sir Keir Starmer, did not rule out a National Insurance increase for employers in the Budget.
Paul Johnson, director of the Institute for Fiscal Studies, told the BBC’s Today programme that “yes, there is a very big hole in public finances” but added: “We’ve always known this.”
“We had this discussion through the election when we were warning there were these problems and Keir Starmer and others were going ‘no, no, no there’s no such issue.
Source: BBC
