Shadow chancellor Rachel Reeves has refused to commit to backing potential tax cuts coming up in the Spring Budget (March 6).
Speaking at a press conference yesterday (February 15) Reeves was asked by a reporter if she would support tax cuts that are rumoured to be announced by Jeremy Hunt next month.
She said: “That depends on the state of the public finances and the projections set out by the OBR.
“I objected to the increases in National Insurance when Rishi Sunak tried to increase them as chancellor because I thought it was wrong to increase taxes on working people in the middle of a cost of living crisis.
“We supported the cuts to NI when the government finally got around to do that. But I will never make any commitments either around spending increases or tax cuts without being able to say where the money is going to come from.”
However, according to reports from the Financial Times yesterday (February 15), Hunt warned colleagues not to expect big tax cuts next month after receiving the OBR’s second pre-Budget figures.
The chancellor’s hopes of a 2 pence cut in the rate of national insurance or income tax are “out of the window based on current forecasts” according to one Conservative official.
This is after Hunt indicated further tax cuts could be on the horizon at the World Economic Forum in Davos last month (January 18).
Speaking to a group of journalists in Davos - including the Financial Times - Hunt described lower tax economies like North America and Asia as “more dynamic and more competitive” saying this was the direction he wanted to move in.
Sian Steele, head of tax at Evelyn Partners said that nothing defined a Conservative chancellor more than a Budget income tax cut.
She said: “In his 2022 leadership campaign the Prime Minister promised to reduce the basic rate of income tax, so such a move from the chancellor cannot be ruled out.
"But the fairer and in many ways more logical move would be to raise the personal income tax allowance or the threshold for the higher rate band – even if a freeze was then reintroduced for subsequent years as planned until 2027/28.”
Despite Hunt fueling tax cut rumours in the months since the Autumn Statement he is now attempting to suppress them.
Speaking to Sky News on Thursday (February 15) Hunt said: “I would only cut taxes in a way that was responsible and I certainly wouldn’t do anything that fueled inflation just when we are starting to have some success in bringing inflation down.”
Labour to fight election on economy
Reeves also said during the conference that Labour would deliver “stability, investment and reform” on the economy.
She added: “Every line in our manifesto will be fully-costed and fully-funded. Labour will fight the next election on the economy.”
Reeves discussed how one-in-three working-age families have less than £1,000 in savings while a typical British family renewing their mortgage this year will find themselves paying an additional £240 a month.
“Over this year and last the fixed rate mortgages of over three million people will come to an end, all paying the price of the Conservative mortgage bombshell,” she added.
Reeves stressed Labour would provide "economic security" for families and businesses.
“We [Labour] will provide a plan based on the understanding that wealth doesn’t just trickle down from the top, it comes from the bottom up and the middle out.”
alina.khan@ft.com
