Labour has no tax surprises in election campaign, Rachel Reeves says
Rachel Reeves has promised that Labour will not announce any additional tax measures beyond what it has already promised, and said there will be no budget until September if it wins the election.
The shadow chancellor said Labour’s election campaign would not include any surprise measures. The party has ruled out increases to income tax, national insurance, corporation tax or any form of wealth tax.
At her first major speech of the campaign, Reeves told the Guardian that all the tax measures the party was planning in order to fund its current commitments had already been announced. “There are no additional tax rises needed beyond the ones that I’ve said.”
Labour has already said it will fund various pledges with measures including a windfall tax on oil and gas firms, adding VAT to private school fees, taxing private equity bonuses, and a further tightening of the non-domicile tax system.
Reeves ruled out a snap budget or fiscal statement should Labour win the election, saying she was committed to receiving forecasts from the Office for Budget Responsibility before any such event.
“The OBR requires 10 weeks’ notice to provide an independent forecast ahead of a budget and I’ve been really clear that I would not deliver a fiscal event without an OBR forecast,” she said. That timeframe would mean no budget until mid-September.
Reeves and the Labour leader, Keir Starmer, have previously ruled out a rise in national insurance and income tax, though over the weekend Starmer did not explicitly rule out a rise in VAT, which Reeves has now done by implication.
However, she hinted during her Q&A session at Rolls-Royce, in Derby, on Tuesday that there was no guarantee Labour would be able to allow a rise in the personal allowance. Not doing so would in effect be a tax rise as wage inflation pushes people into higher tax bands.
“Unlike the Conservatives, I won’t make unfunded commitments, because the truth about unfunded commitments is that no one has any confidence that you can deliver on them,” she said.
The Institute for Fiscal Studies, a leading economic thinktank, has called for a more transparent conversation about tax and spending. The director of the IFS, Paul Johnson, said recently that both parties must “reckon with the reality of the economic and fiscal context in which this election is taking place”.
He said they would face stark choices in government and that parties would need to choose between cutting spending, raising taxes further or increasing annual borrowing.
“The parties might well be reluctant to tell us which of these they would opt for upon taking office. That doesn’t mean that we should refrain from asking them,” the IFS report said.
In her speech, which came as the party was endorsed by 120 major business leaders in a letter to the Times, Reeves said Labour would become the natural home for business.
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“I’m not one of those politicians who thinks the private sector is a dirty word, or a necessary evil. I’ve worked in the private sector … And I know that economic growth comes from the success of businesses, large, medium and small – there is no other way.
“I’m not talking about the old trickle-down, free-market dogmas of the past but instead a new spirit of partnership between government and business.”
Reeves said the economy would be a major theme of Labour’s election campaign. “We will fight this election on the economy. Every day we will expose the damage the Conservatives have done, the further damage they threaten to do. And we will set out Labour’s alternative.”
Among those who have signed the endorsement of Labour are Charles Harman, a former vice-chair at JPMorgan Cazenove, Andy Palmer, the former Aston Martin chief executive and John Holland-Kaye, a former chief of Heathrow airport.
The Unite union called on Labour to distance itself from Holland-Kaye, citing fire and rehire practices at Heathrow during the pandemic, a practice that Labour has pledged to ban. Some unions say Labour’s promise on workers’ rights has been watered down to allow businesses to fire and rehire in desperate circumstances.
The Unite general secretary, Sharon Graham, said: “Labour must immediately distance itself from John Holland-Kaye, who was responsible for one of, if not the most brutal example of fire and rehire during the Covid pandemic.”