A former economic adviser to Sir Keir Starmer has warned the prime minister and his chancellor Rachel Reeves have no choice but to raise taxes.
In an astonishing criticism, Nick Williams, who left Number 10 last month, said Labour’s current public spending plans were “not credible” and would have to be reconsidered.
“The bottom line is that taxes will have to go up,” he added.
Mr Williams’s departure from Downing Street raised eyebrows in Westminster and came as part of a clear out that also included Tom Webb, the prime minister's health adviser.
He had been with the party since their time in Opposition, when he was Labour’s head of economic policy, before becoming Sir Keir’s adviser on planning, infrastructure and housing.
In an article for The Times he warns that Ms Reeves’s next budget will be “the last opportunity to make a meaningful change that the public has time to feel before the next election”.
He said: “While the government builds momentum behind growth, the path of public spending is just not credible.
“Not to mend creaking local government. Not to tackle rampant crime. Not to meet the modern demands for defence. And certainly not to fill the fiscal hole from sharply cutting immigration.
“The bottom line is that taxes will have to go up. There are ways this can be done which are fair and respect manifesto promises.
“The next opportunity to do so is the autumn budget. This is also realistically the last opportunity to make a meaningful change that the public has time to feel before the next election.”
Reeves created nearly £10bn of ‘headroom’ with her first set of cuts in office, but that was wiped out within months amid low growth and higher borrowing costs.
In response, she gave herself another £9.9 billion of headroom at the last budget, but has faced mounting warnings for weeks that it will not be enough and that she will have to come back either with more cuts, which would be difficult in the current climate as Labour MPs increasing worry over her plans to slash benefits, or tax rises.
The situation has been made harder by Donald Trump’s across the board 10 per cent tariffs on British goods entering the UK, even after Sir Keir agreed a deal with the US President to cut the levies on cars and steel last week.
Labour’s manifesto pledged the party would not raise income tax, VAT or national insurance for individuals.
On Thursday, Sir Keir welcomed the latest growth figures, which showed the UK economy grew by 0.7 per cent in the last quarter, and claimed they showed the government was “making the right decisions” on the economy.
Speaking to broadcasters during a visit to Albania, the PM said: “I think they show the strength and resilience of the British economy and the potential.
“I don’t think they should be seen in isolation, because we have also had four interest rate cuts in a row, and what that shows is that in an uncertain world, particularly globally, this Government is making the right decisions on growth.
“I would be the first to accept there is more work to do so we will roll up our sleeves and get on with that, but this is very good news for the British economy, very good for working people across the country.”
But Unite general secretary Sharon Graham warned “it is far from clear that we are heading in the right direction.
"If we are ever going to get sustained growth, the government will need to focus more on creating and protecting good quality jobs and on getting more money into the pockets of workers,” she said.
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