The Chancellor has insisted that the wealthiest Brits must bear the burden of rebuilding Britain’s ‘creaky’ public services.
Rachel Reeves defended her tax rising budget, which raised the tax burden by £26billion, to improve schools, hospitals and infrastructure, and declined to rule out a future hike.
She claimed that Labour MPs want Sir Keir Starmer to succeed after the PM faced persistent rumours that ambitious colleagues wanted the top job.
‘We all know what happened in the last government, when they went through leaders and chancellors. It was bad for the country,’ Ms Reeves said.
In an interview with The Guardian, Ms Reeves said: ‘When you’ve got creaky infrastructure, you’re not able to get the productivity benefits. So you know what, I’ve chosen to protect public spending in the budget.
‘It’s quite clear that the economic burden in the budget was not about age. It was about wealth. People who bear more of the burden are those with big incomes and assets … so I don’t accept that.’
It comes after Ms Reeves was accused of ‘lying’ to the public and markets yesterday after the Treasury’s own watchdog revealed she was told months ago that there was no hole in the public finances.
The Chancellor delivered a series of extraordinary grim warnings about the state of the government’s books in the run-up to the Budget.
Rachel Reeves defended her tax rising budget, which raised the tax burden by £26billion, to improve schools, hospitals and infrastructure
Ms Reeves and Sir Keir at the Labour Party Conference. Ms Reeves claimed Labour MPs want Sir Keir Starmer to succeed after the PM faced persistent rumours that ambitious colleagues wanted the top job
She flagged that the Office for Budget Responsibility was downgrading productivity, as well as blaming everything from Brexit to Tory austerity and Donald Trump for a ‘worse than expected’ outlook.
Ms Reeves even made a highly unusual ‘scene setter’ speech in Downing Street on November 4 hinting that she would have to breach Labour’s manifesto promises not to increase income tax.
And six days later she gave an interview to the BBC in which she insisted that the only way to balance the books without an income tax hike was to cut ‘capital spending’ – something she made clear she was not willing to do.
However, a bombshell letter from the OBR to the Treasury committee has now laid bare that Ms Reeves has known since September that revisions to tax revenues had almost completely offset a £21billion productivity downgrade.
By October 31 the watchdog said it had informed Ms Reeves that she was in fact meeting both her fiscal rules without the need for any action – giving her more than £4billion in headroom.
In the event the Chancellor announced an eye-watering £30billion package of tax rises on Wednesday, a large chunk of which went on benefits rises that had been demanded by mutinous Labour MPs.
She had already U-turned on the hints of income tax rises – if they were ever seriously considered – but only after the fact they were not happening was leaked to the Financial Times.
The dramatic revelation sparked fury, with the Chancellor accused of ‘deliberately misleading’ the public and markets.
Speaking exclusively to The Guardian, the Chancellor refused to rule out future tax hikes
On November 4 Ms Reeves told the press conference in Downing Street: ‘The OBR – the UK’s public finance watchdog – will set out the conclusions of their review of the supply side of the UK economy.
‘I will not pre-empt those conclusions but it is already clear that the productivity performance… is weaker than previously thought.
‘A less productive economy is one that produces less output per hour worked.
‘That has consequences for working people – for their jobs and for their wages… and it has consequences for the public finances too, in lower tax receipts.’
Speaking to BBC Radio 5 Live on November 10 she went even further with her apocalyptic hints, saying ‘it would be possible’ to stick with the manifesto commitments ‘but that would require deep cuts to capital spending’.
It was not until November 17 that the Financial Times reported the idea of an income tax rise had been dropped.
Downing Street denied that Ms Reeves had ‘misled’ the country, saying she had been ‘very clear’ about the decisions.
Asked about the OBR telling Ms Reeves that the productivity downgrade had already been fully offset, a No10 spokesman said: ‘At the Budget she set out the decisions very, very clearly.’
Pressed that Ms Reeves could have ‘significantly misled’ markets, the spokesman said: ‘I don’t accept that. As she set out in the speech she gave here, she talked about the challenges the country is facing. She set out the decisions very clearly at the Budget.’
