Chancellor Rachel Reeves has said she was “wrong” when she said during the election campaign that she would not need to raise taxes, but insisted further increases will not be needed.
During a campaign event on June 11, Ms Reeves said she would not need to raise taxes beyond the increases already set out in the Labour Party’s manifesto.
But delivering her first Budget on Wednesday, she announced £40 billion of tax rises, including increases to employers’ national insurance contributions and changes to inheritance tax and capital gains tax, as she sought to pay for investment in public services such as schools and the NHS.
Appearing on Sky News’s Sunday Morning with Trevor Phillips, Ms Reeves said she had been “wrong” during the election, because she did not “know everything” about the state of the public finances.
There’s no need to come back with another Budget like this, we’ll never need to do that again
She said: “I arrived at the Treasury on July 5, just over a month after I said those words. I was taken into a room by the senior officials at the Treasury and they set out the huge black hole in the public finances, beyond which anybody knew about at the time of the general election.”
The size of that “black hole” between the previous government’s commitments and what it was actually spending has been disputed.
The Government has claimed it amounts to £22 billion, while the Conservatives have dismissed it as “fiction”.
But the Office for Budget Responsibility said the previous government had failed to disclose around £9 billion of additional spending pressures at the time of the last Budget in March, adding that the position may have changed between March and July.
Announcing the tax rises on Wednesday, Ms Reeves gave an “absolute commitment” that there will be no tax increases on “working people”, saying they Government has “wiped the slate clean” after the Tories’ “mismanagement”.
She said: “It’s now on us.
“We’ve put everything out into the open, we’ve set the spending envelope of this Parliament, we don’t need to come back for more, we’ve done that now, we’ve wiped the slate clean.”
Pressed on whether she will return with more tax rises, the Chancellor replied: “I’m not going to be able to write five years worth of budgets on this show today, but there’s no need to come back with another Budget like this, we’ll never need to do that again.”
Economists at the Institute for Fiscal Studies and the Resolution Foundation suggested after the Budget that current spending plans mean the Chancellor will have to find £9 billion more after next year to avoid making cuts to unprotected departments.
But Ms Reeves is counting on economic growth to help avoid further tax rises.
She is expected to set out a series of reforms to pensions, welfare and industrial strategy in the coming weeks.
Combined with reforms to the planning system to speed up building projects, Labour hopes the changes will be enough to significantly boost investment, productivity and economic growth.
