Rachel Reeves quizzed by Laura Kuenssberg on National Insurance
Rachel Reeves has faced a furious backlash over her colossal ￡40 billion tax raid despite her commitment in June that the only increases needed were in the Labour manifesto.
Speaking to the BBC she denied that Labour was already having behind-the-scenes discussions about hiking national insurance before the election.
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She only made her mind up after Treasury officials showed her the “true state of the finances”, she said.
Ms Reeves said she was “wrong” to make the promise as she blamed the previous government for hiding a “black hole” in the country’s finances.
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And referring to comments made during the election campaign, Ms Reeves told Sky News’s Sunday Morning With Trevor Philips: “I was wrong on June 11, I didn’t know everything.
“Because when I arrived at the Treasury on July 5, just over a month after I said those words, I was taken into a room by the senior officials at the Treasury and they set out the huge black hole in the public finances, beyond which anybody knew about at the time of the general election because the previous government hid it from the country, they hid it from Parliament, and indeed they hid it from the independent official forecasters at the Office for Budget Responsibility.
“So when I went into that Budget last week, I had to put our public finances back on a firm trajectory.”
The previous government’s national insurance cuts were “sold on a false premise”, the Chancellor has said.
Asked why she had supported the cuts at the time, Rachel Reeves told Sky News’s Sunday Morning With Trevor Philips: “They were sold on a false premise, the premise being that the money was available.
“The money clearly wasn’t available, that’s what the ￡22 billion black hole was.”
She added: “I supported those cuts to national insurance because they were costed and funded, but now what we find out after the election is that the numbers didn’t add up because the government hadn’t revealed to the Office for Budget Responsibility or Parliament the gap between the commitments they were making and the money they had coming in.”
Conservative shadow culture secretary Julia Lopez blasted the Chancellor for being “dishonest” with the public.
“Last week the Chancellor delivered a Budget which broke Labour’s promises,” she said.
“It was dishonest and, as Labour have admitted, it will make people poorer.
“Labour’s political choices to impose a tax on working people, local GP services, care homes and introduce a family farm tax were nowhere to be seen in their manifesto.
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“That is because Starmer and Reeves did not have courage to be honest with people during the election.
“We are clear these are Labour’s choices and Labour’s choices alone.”
Appearing on Sunday with Laura Kuenssberg, Ms Reeves was asked whether there was any chance she would rethink the National Insurance rise for employers.
"I'm not immune to their criticism," she said, "but we've got to raise the money to put our public finances on a firm footing".
From next April, employers will have to pay NI at 15% on salaries above ￡5,000, instead of 13.8% on salaries above ￡9,100 currently.
The Institute of General Practice Management, which represents GP practice managers, has estimated the rise will put up the tax bill of the average surgery by around ￡20,000 a year.
Raising employer NI had not been on the party's agenda before the general election.
Meanwhile, Ms Reeves is scrambling to counter warnings from the Treasury watchdog that the Budget will squeeze the economy.
It comes as a new report from the Centre for Policy Studies shows that state spending will sit at an astonishing ￡1.5 trillion by 2029/30.
The tax burden as a share of GDP is on track to reach the highest sustained level since records began over 300 years ago, it warns.
Ms said she will reveal plans later this month designed to “unlock more private investment to fuel our growth mission”.
Speaking to the Sunday Times, the Chancellor insisted that her plans for economic reform would bring more growth than economists think.
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She is expected to set out a series of reforms to pensions, welfare and industrial strategy in the coming weeks.
Combined with reforms to the planning system to speed up building projects, Labour hopes the changes will be enough to significantly boost investment, productivity and economic growth.
Economists at the Institute for Fiscal Studies and the Resolution Foundation suggested after the Budget that current spending plans mean the Chancellor will have to find ￡9 billion more after next year to avoid making cuts to unprotected departments.