Rachel Reeves confirmed she no longer stands by Labour’s no-tax pledge, citing conflicts, US tariffs and rising borrowing costs ahead of her conference speech.
However, the chancellor made a strong implication that the VAT increase was not part of the November budget in a series of television interviews before her speech at the event in Liverpool on Monday.
She also supported Keir Starmer's claim that Reform UK's proposal to retroactively deny many immigrants their right to be in the UK was racist, arguing that the policy concept was entirely distinct from those that excluded those who lacked the legal right to be there.
Although this commitment was more about significant increases on the size of her first budget than it was about tax increases per se, Reeves stated in an interview with the CBI in November of last year that she was "not coming back with more borrowing or more taxes."
Asked on Radio 4’s Today programme on Monday where she stood on the statement about more borrowing or more taxes, Reeves replied:
“Well, look, I think everyone can see in the last year that the world has changed, and we’re not immune to that change.
Whether it is wars in Europe and the Middle East, whether it is increased barriers to trade because of tariffs coming from the United States, whether it is the global cost of borrowing, we’re not immune to any of those things.”
Asked about the idea that tax rises could include a rise in VAT, Reeves indicated strongly this was not the case. The chancellor is understood to believe raising VAT would hit working people directly and would stoke inflation.
Asked about the tax on One’s Breakfast programme, she said: “We made a commitment in our manifesto, and those commitments do stand. And they stand for a reason, because in the last parliament it was ordinary working people who bore the brunt of the economic mismanagement.”
Pushed on whether that meant she was “saying no rise in VAT”, Reeves replied:
“We made those commitments for a reason, and those commitments stand and judge me on my record.”
But speaking to Today, she hit out at speculation about what could be in the budget.
“There are a lot of people who claim to know what is going to be in my budget. They don’t,”
she said.
“A lot of them are talking rubbish, and frankly, a lot of it is very irresponsible. People were told last year that I was going to do this, I was going to do that, and people made decisions with their money that often were irreversible decisions.”
What specific taxes might be increased in the November Budget?
Possible increases in capital gains tax (CGT) rates, especially on profits from the sale of homes in excess of £1.5 million, and the elimination of private residence relief on such sales.
Reforms could include new higher council tax bands for expensive homes, plans for replacing stamp duty land tax (SDLT) with a new national land tax, and ideas to allow spreading stamp duty payments over multiple years.
Potential revision of the lifetime gifting rules and the treatment of taper rates to generate additional estate tax revenue.
The freeze on income tax and National Insurance thresholds could be extended, indirectly increasing tax, since incomes would automatically increase with inflation while thresholds remain constant.