The Government will be guided by “fairness” on tax, a senior Cabinet minister said when asked if tax rises are coming in the autumn budget.
Transport Secretary Heidi Alexander would not rule out tax rises in the budget as she toured the broadcast studios on Sunday morning.
She also told Sky News’s Sunday Morning With Trevor Phillips programme that Cabinet ministers did not “directly” talk about the idea of a wealth tax – as advanced by unions and former Labour leader Lord Neil Kinnock – during an away day at the Prime Minister’s Chequers country estate this week.
Chancellor Rachel Reeves has refused to rule out tax rises at the budget since Labour MPs forced ministers to make a U-turn on welfare reforms, which the Government had hoped would save up to £5 billion a year.
Fiscal watchdog the Office for Budget Responsibility (OBR) this week warned that the UK’s state finances are on an “unsustainable” path due to a raft of public spending promises the Government “cannot afford” in the longer term.
Meanwhile, economists have warned Ms Reeves on several occasions that her fiscal headroom – the leeway within the Government’s self-imposed spending rules – could be eroded by unexpected economic turns.
Ministers are committed to not raising income tax, national insurance and VAT – the three main taxes which affect working people – to pay for their plans.
Lord Kinnock last week suggested a wealth tax could “commend” the Government to the general public and help it bolster the public funds while not breaking its existing pledges.
Union leaders, including Sharon Graham of Unite, are also pressuring ministers to consider the move.
Asked by Sky News if such a tax had been discussed at the Cabinet away day on Friday, Ms Alexander said: “Not directly at the away day.”
Pressed on what she meant by not directly, the senior minister replied: “I think your viewers would be surprised if we didn’t recognise that, at the budget, the Chancellor will need to look at the OBR forecast that is given to her, and will make decisions in line with the fiscal rules that she has set out.
“We made a commitment in our manifesto not to be putting up taxes on people on modest incomes, working people. We have stuck to that.”
Asked again if this meant there will be tax rises in the budget, Ms Alexander replied: “So, the Chancellor will set her budget. I’m not going to sit in a TV studio today and speculate on what the contents of that budget might be.
“When it comes to taxation, fairness is going to be our guiding principle.”
Shadow home secretary Chris Philp told Sky News Ms Alexander’s references to fairness sounded “like a barely disguised reference to tax rises coming in the autumn”.
He added: “They can’t get anything past their own back benches. The consequence of all of that is going to be tax rises for people who are working hard and on businesses.
“It’s nothing to do with fairness, it’s a symptom of Labour failure.”
