5 godzin temu
Rachel Reeves has refused to rule out introducing a new wealth tax as she faces mounting pressure to fill a multi-billion pound budget black hole. The Chancellor insisted her commitments not to raise taxes on "working people" remained firmly in place.
Speaking to reporters, Reeves said she would not comment on speculation around her next budget when a date for the statement had not even been set. However, she reaffirmed promises not to increase income tax, national insurance and value added tax (VAT).
Government U-turns create budget pressures
The Government's reversals over welfare reform and winter fuel payments have left the Chancellor with significant financial gaps to address. This has fuelled speculation that she might target the assets of wealthy individuals to raise additional revenue.
When asked directly to rule out a wealth tax, Reeves told reporters: "We haven't even set the date for the budget yet, so please forgive me if I'm not going to speculate about what might happen at an event that we haven't even decided a date on yet." She emphasised that the Government had been "really clear" about which taxes it would not increase.
Fiscal rules remain "non-negotiable"
Reeves described her fiscal rules as "non-negotiable" because "they are what give working people security, around interest rates for example". The Chancellor is on course to meet her goal of funding day-to-day spending through revenues rather than borrowing, but only by a narrow margin.
This tight financial position makes her vulnerable to any increase in debt interest costs or reductions in planned savings. Reeves highlighted that "interest rates have come down four times in the last year under this Labour Government because of the stability that we've managed to return to the economy".
Bank governor signals further rate cuts
Bank of England governor Andrew Bailey has suggested there could be larger interest rate cuts if the jobs market shows signs of weakness. He pointed to the impact of Reeves' decision to increase employers' national insurance contributions (NICs) on employment.
Bailey noted that businesses are "adjusting employment" as a result of the NICs increase. He said workers are "also having pay rises that are possibly less than they would have been if the NICs change hadn't happened".
Economy growing below potential
In an interview with The Times, the governor said the British economy was growing behind its potential. This could create "slack" to bring down inflation, meaning prices on goods would rise less swiftly compared with earnings in future.
Bailey expressed confidence that the base rate set by the Bank of England would be lowered in future, after it was held in June. "I really do believe the path is downward," he told The Times, though he cautioned the approach would remain "gradual and careful".
The current Bank rate of 4.25%, which influences all lending in the UK including mortgages, will be reviewed again on 7 August by the Bank's Monetary Policy Committee. Treasury Chief Secretary Darren Jones said it was entirely normal for firms to adjust their business plans because of a tax hike, noting the creation of hundreds of thousands of new jobs across the country.
(PA) Note: This article has been edited with the help of Artificial Intelligence.
