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Rachel Reeves' economic 'con' that she will use to hike your taxes exposed by Jeremy Hunt

2024-08-21 00:00:00.0 每日快报-政治原网页

Jeremy Hunt has slammed Rachel Reeves's economic 'con' (Image: Getty/Press Association)

Rachel Reeves has “no reason or excuse to raise taxes” and is presiding over an "economic con", Jeremy Hunt has declared.

The Chancellor is set to hike inheritance tax and capital gains tax in the October Budget after fuelling Government borrowing costs with her public sector pay bonanza.

Ms Reeves is expected to ignore better-than-expected growth figures, improving retail sales and low inflation and inflict more pain on cash-strapped families.

Shadow chancellor Jeremy Hunt told the Daily Express: “Rachel Reeves is still committed to her economic con, regardless of the evidence.

"Just last week, we saw two sets of positive economic news – with inflation remaining low and GDP figures confirming that our strong and resilient economy continues to grow - with some economists even describing it as ‘gangbusters’.

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“These are tax rises that she has planned right from the beginning, but simply did not have the courage to tell the British public about during the election.

“So as she continues to lay the ground for tax rises, one thing is clear – when they are finally revealed it will be a complete and total betrayal of the British public.

“She will not be forgiven for it.”

Labour’s economic credibility has been heavily questioned since the Chancellor claimed there was a ￡22bn black hole in the public finances – only to then hand out inflation-busting pay rises to millions of workers.

And shock new figures revealed the public sector pay increases fuelled a rise in Government borrowing.

The Office for National Statistics (ONS) said public sector net borrowing stood at ￡3.1 billion last month - ￡1.8 billion more than a year ago and the highest July borrowing since 2021.

Labour’s Treasury team tried to exploit these figures, claiming they were further proof of the “dire” economic situation they inherited.

So far this financial year, the Government has borrowed ￡51.4bn, which is ￡4.7bn more than the OBR predicted.

The spending watchdog said higher pay deals for public sector workers were a key factor.

And the figures do not include a 22% pay hike for junior doctors and a 14% rise for train drivers.

Economists have predicted Ms Reeves will try and raise an additional ￡10bn through taxes.

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Sarah Coles, head of personal finance, Hargreaves Lansdown: “The tax take continues to soar, and the sums involved would turn the head of any Chancellor assembling their first Budget.

“Speculation has been rife that Rachel Reeves is considering Inheritance Tax and Capital Gains Tax as potential money-raising targets in her October Budget, and billions of pounds pouring in through the doors of the Treasury are unlikely to persuade her there’s not more potential tax to reap.

“Hiking Capital Gains Tax at a time when the government wants to encourage more investment in UK companies is counter intuitive.

“It also runs the risk of encouraging investors to hold assets until they die – when CGT is effectively reset to zero.”

The Office for Budget Responsibility is expected to revise up its 0.8% growth forecast for the year as a whole in its assessment for the October budget.

Alex Kerr at Capital Economics said spiralling spending meant the Chancellor was likely to launch a multi-billion pound tax raid in October’s Budget.

“We think that she will look to raise an additional ￡10bn a year via higher taxes in the Budget and increase borrowing by around ￡7bn a year,” he said.

Borrowing in the financial year from the end of March to July was ￡51.4 billion, ￡500 million less than in the same four-month period a year earlier, but the fourth highest year-to-July borrowing since monthly records began in January 1993, the ONS said.

Ms Reeves last month ditched winter fuel allowances for 10 million pensioners as part of immediate action to address a shortfall in the public finances by ￡5.5 billion, with the rest of the gap to be tackled at a Budget on October 30.

Isabel Stockton, senior research economist at the Institute for Fiscal Studies, said: "The early signs are that better-than-expected growth figures won't be enough to save Rachel Reeves from tough choices in her first Budget on October 30.

"The combination of in-year spending pressures identified at last month's spending audit and the ongoing, and well known, pressures facing many public services suggest that the accompanying spending review for 2025-26 could be a particularly difficult exercise."

The Government also spent ￡7billion on debt interest in July, the second highest total for the month since records began in 1997.

Traders in financial markets believe that the Bank of England will cut rates twice more this year, taking the base rate down to 4.5 per cent from 5 per cent.

They estimate that there is 50-50 chance that rates will fall again at the Bank’s next rate-setting meeting on September 19.

Darren Jones, chief secretary to the Treasury, said the borrowing figures underlined “ the tough decisions that are needed to fix the foundations of our economy”.

Treasury chief secretary to the Treasury Mr Jones appeared to explicitly rule out abolishing the cap at the next Budget in an interview on Wednesday, while conceding it was not a decision the Government would want to make "in our hearts".

Asked about the prospects of abolishing the two-child benefit cap at the Budget on October 30, Mr Jones told the BBC's World At One programme: "You have to just look at the economic statistics that we're talking about today to understand why we just can't afford to do that right now."

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