Rachel Reeves has suggested higher taxes on the wealthy will be part of her Budget next month.
The Chancellor acknowledged she was looking at potential tax rises and spending cuts to fill a hole in her Budget which she said was partly due to the lingering impact of Brexit.
Asked whether higher taxes on the wealthy would feature as part of her November 26 statement, she said they would be “part of the story”.
She also said there had been scaremongering over her decisions last year that hit the pockets of the wealthy as she spoke to The Guardian during a trip to Washington for the International Monetary Fund (IMF) meeting.
“Last year, when we announced things like the non-doms, like the (tax increase for) private equity, like the VAT on private school fees, there was so much bleating that it wasn’t going to raise the money – that people would leave.
“The Office for Budget Responsibility will publish updated numbers on all of those things. And that scaremongering didn’t pay off, because this is a brilliant country and people want to live here,” she said.
With no boom in economic growth, stubbornly high inflation and the mounting costs of government debt, Ms Reeves will have to fill a black hole estimated at around £50 billion by some economists.
Before she departed for the US, she told Sky News that “of course, we’re looking at tax and spending”.
She confirmed the budget watchdog had “consistently overestimated” the UK’s productivity, with the expected downgrade of its previous assumptions likely to make Ms Reeves’ task even harder.
She said the economy was still suffering from the impacts of leaving the European Union, austerity policies and Liz Truss’s mini-budget.
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The National Institute of Economic and Social Research (Niesr) has suggested Ms Reeves will need to find around £50 billion a year by 2029-39 to meet her goal of balancing day-to-day spending with tax revenues while maintaining “headroom” of around £10 billion against that target.
Asked if she was now in a “doom loop” of having to constantly hike taxes to fill a black hole, Ms Reeves said she would not use those words but “nobody wants that cycle to end more than I do”.
She said: “Challenges are being thrown our way, whether that is the geopolitical uncertainties, the conflicts around the world, the increased tariffs and barriers to trade and now this review looking at how productive our economy has been in the past and then projecting that forward.
“But I won’t duck those challenges. Of course, we’re looking at tax and spending as well, but the numbers will always add up with me as Chancellor because we saw just three years ago what happens when a government, where the Conservatives, lost control of the public finances – inflation and interest rates went through the roof.”
She said reforms to the planning system would help “get back to building in Britain”.
The IMF warned UK inflation is set to surge to the highest in the G7 group of developed democracies in 2025 and 2026.
The IMF increased its UK economic growth forecast for this year but reduced its assessment for 2026 amid concerns over the labour market.
Britain is set to be the second fastest-growing G7 country this year, the IMF also said, with only the US growing faster.
Shadow chancellor Sir Mel Stride said: “Rachel Reeves doesn’t need to raise taxes. She needs to get a grip of Government spending – including the welfare bill.
“Be in no doubt, this tax doom loop is down to the Chancellor’s economic mismanagement.
“Under Rachel Reeves we have seen inflation double, debt balloon, borrowing costs at a 27-year high, and taxes up – with more pain on the way in the autumn.”
