The Chancellor says the public has been “misled for too long” as she defends some of the spending cuts she has made to plug an apparent £22bn funding gap.
Rachel Reeves has strongly hinted at tax increases in the autumn budget, promising to be “honest” about the “tough” decisions ahead.
The chancellor said that while she did not want to raise taxes on workers, the public had been “misled for too long” about the state of the country’s finances.
“There will be more difficult decisions” on spending, welfare and taxes, she added, when asked if people should prepare for tax increases in the fall.
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During the election campaign, Ms Reeves promised not to increase major taxes – national insurance, income tax and VAT.
But some speculated that Labour could then tackle other taxes, including capital gains and inheritance.
Speaking at a press conference shortly after making a statement to MPs in which she announced a series of spending cuts To plug part of a £22bn funding gap, Ms Reeves said: “I don’t want to raise taxes on working people.
“The truth is we didn’t know about this £22 billion black hole this year when we went to the polls on July 4.
“So there will be more difficult decisions to be made on spending, welfare and taxation in the budget and spending review later this year.”
Earlier today, the Chancellor announced a series of cuts, including to the winter fuel payment, which will now only benefit those in receipt of pension credit.
She also announced that reforms to adult social care charges, which had been delayed by the previous government, would also not go ahead under Labour, a move which will save more than £1bn by the end of next year.
Ms Reeves’ statement came after it was announced that Junior doctors offered 22.3% pay rise by the government to end the strike.
Asked by Sky News deputy political editor Sam Coates how she could justify taking some of the winter fuel payments from pensioners while giving junior doctors a pay rise – something that has been criticised by charities including Age UK – Ms Reeves said the impact of not settling the long-running pay dispute “also has real costs”.
She said appointments cancelled due to strikes affect “everyone in society, but perhaps the older members of our society are most affected”.
Reeves announces budget cuts
“I also understand why Age UK is disappointed,” the Chancellor continued.
“It is not an easy decision to announce that the winter fuel payment will only be provided to those in receipt of pension credit.
“But it is the right decision in the circumstances we find ourselves in to ensure that pension credit continues to flow to the poorest pensioners.”
Ms Reeves said she was being forced to make “difficult” decisions because of the “unforgivable” legacy Labour had received from the Conservative government, which she accused of giving Britain “false hope”.
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Hunt: Chancellor’s argument ‘not credible’
In response, shadow chancellor Jeremy Hunt accused Ms Reeves of conducting a “political” rather than an “economic” exercise with her statement, which he called a “brazen attempt to lay the foundations for tax increases that she hasn’t had the courage to tell us about”.
“She says the information is new, but she herself told the Financial Times: ‘You don’t need to win an election to know the state of the public finances because we now have the OBR (Office for Budget Responsibility)’.”
Mr Hunt quoted economic expert Paul Johnson, of the Institute for Fiscal Studies, and said the state of the public finances “was obvious before the election to anyone who cared to look – which is why he and other independent figures say his argument is not credible and will not hold up”.
He added: “She wants to blame the last Conservative government for the tax hikes and the cancellations of projects that she has been planning all along.”