Starmer opens door to tax raid on savers
Pressed about possible tax increases in the autumn Budget, the Prime Minister suggested they would only rise for people with enough savings to 'buy their way out of problems'.
Rachel Reeves is scrambling to fill a black hole of as much as £40bn in the public finances, following a series of policy about-turns and a slowdown in growth.
Labour pledged in its manifesto not to hit working people with higher taxes but ministers have repeatedly been unable to agree on a definition of 'working people'.
On Wednesday, the Prime Minister argued that they were the 'sort of people that work hard but haven't necessarily got the savings to buy their way out of problems', raising fears that savers could be next to be hit.
During Prime Minister's Questions, Sir Keir failed to rule out a raid on pension contributions and the self-employed.
The Treasury opened the door to a fresh raid on VAT after a minister said the Government would leave 'the headline rate' untouched.
Ministers have promised not to put up taxes for those with 'modest incomes', but have not said where the axe will fall.
Manifesto commitments
Labour pledged in its manifesto not to raise income tax, national insurance or VAT and promised working people would not pay more.
The party attacked the Tories for raising taxes in office but they went up by £40bn in Rachel Reeves's first budget, which broke Labour's manifesto pledge not to raise national insurance by increasing employers' contributions.
Rachel Reeves promised not to raise taxes again earlier this year but U-turns on welfare cuts and winter fuel are likely to force her to break this promise.
Any VAT raid would fall short of Labour's manifesto pledge not to touch the tax at all, but the Chancellor could extend it in ways that could raise tens of billions of pounds.
Options include removing VAT exemptions from some goods and services, or extending the tax to smaller businesses.
The headline rate of VAT currently stands at 20 per cent but there are a range of exemptions and exceptions that could be adjusted.
One option would be to apply the full rate of VAT to goods and services, which currently attract the tax at either 0 or 5 per cent.
This has already been done for private school fees – fulfilling a separate manifesto pledge – in an attempt to raise as much as £1.7bn per year from those educated outside the state system.
In 2012, George Osborne extended the levy to items including pasties, but was forced to U-turn following a backlash.
Questioned on Wednesday by Kemi Badenoch about a series of potential taxes which could be increased, the Prime Minister said he would not 'write the Budget' months in advance.
'Modest income'
The Conservative leader challenged Sir Keir to define what was meant by a 'modest income'.
He replied: 'I think of the working people across this country who put in every day and don't get back what they deserve.
'And that's who we're working for. That's who we're fixing the country for: the sort of people that work hard but haven't necessarily got the savings to buy their way out of problems.'
The Tory leader then quoted Darren Jones, the Chief Secretary to the Treasury, who said earlier this week that working people are 'people who don't get a pay slip'.
'Millions of self-employed people don't get a pay slip,' she said. 'So are the self-employed next in line for a Labour tax raid?'
Sir Keir sidestepped the question, saying: 'The self-employed were the very people who suffered under their watch, repeatedly suffered under their watch.'
Pension contributions targeted?
Ms Badenoch then claimed the Government would consider levying a tax on pension contributions.
'We know the Chancellor is launching a review into pension contributions,' she said. 'It's as clear as day why this is – it is because the Government is considering taxing them.
'Does the Prime Minister agree with me that a tax on pension contributions is a tax on working people?'
Sir Keir replied: 'We made absolutely clear manifesto commitments which she asked me about last week and we're keeping to. I'm not going to write the Budget months out.'
A Conservative Party spokesman said: 'Labour won't rule out hitting the self-employed with new taxes. They won't rule out a tax raid on pensions.
'And the Prime Minister says 'modest incomes' refers to anyone without savings, raising the prospect of a tax on savings in the autumn.
'Labour are treating working people with contempt. Hiking taxes is not inevitable – it is a choice brought on by the Government's economic incompetence.'
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