Chancellor Rachel Reeves plans to make tax rises and spending cuts worth £40 billion in this month's Budget, government sources have told the BBC.
At a political cabinet meeting this morning, Reeves told ministers that plugging “the £22 billion black hole inherited from the previous government” would only be enough “to keep public services at a standstill”.
Reeves is currently drawing up plans to find £40 billion to avoid real terms cuts to departments, according to sources, as first reported by the Financial Times and The Times.
Reeves warned ministers that “difficult decisions on spending, welfare and taxes” would lie ahead in his October budget.
The Chancellor is finalizing the details of her first Budget, which will be announced on Wednesday 30 October.
She recently declared that there would be “no return to austerity” under this government and promised an increase in public investment, intended to revive growth.
A UK Treasury spokesperson said: “We do not comment on speculation about tax changes outside of tax events. »
In an interview with BBC Breakfast on Tuesday, Sir Keir Starmer did not rule out an increase in national insurance for employers in the budget.
Treasury officials are reportedly considering national insurance on employers' pension contributions to boost budget revenues.
Employers pay NI at the rate of 13.8% on all employee earnings above £175 per week, but pension contributions made by employers are currently exempt from this levy.
The Prime Minister sidestepped the question of whether Labour's manifesto promise not to raise taxes on “workers” also covered employers' social insurance.
Labour's 2024 manifesto ruled out any increases in taxes for “working people”, such as national insurance, income tax and VAT.
On Monday, Reeves said Labour's election pledge not to increase NI for “workers” was linked to the employee element, as opposed to the amount paid by employers.
Leading business groups in the UK have raised concerns over a possible tax rise, warning it would “hamper” economic growth and “hammer” the hospitality sector.
The Prime Minister is adamant that he will not be swayed by budget speculation ahead of the official announcement, in just over a fortnight.
This is the standard position that governments take given that these are market-moving measures – and in this particular case, the budget will be the most important political and economic moment for this government so far .
