Rachel Reeves has strongly hinted there will be tax rises in the autumn budget as she promised to be “honest” about “difficult” decisions that lie ahead.
The chancellor said while she did not want to increase taxes on working people, the public had been “misled for too long” about the state of the country’s finances.
“There will be more difficult decisions” around spending, welfare and tax, she added, when asked whether people should be prepared for taxes to be increased in the autumn.
Politics latest: Chancellor unveils huge cuts
During the election campaign, Ms Reeves promised not to increase major taxes – national insurance, income tax and VAT.
But there was speculation that Labour could then take aim at other taxes, including capital gains and inheritance.
Speaking at a press conference shortly after she gave a statement to MPs in which she announced a series of spending cuts to make up part of a £22bn funding shortfall, Ms Reeves said: “I don’t want to increase taxes on working people.
“The truth is we did not know about this £22bn black hole this year when we went to the polls on 4 July.
“And so there will be more difficult decisions around spending, around welfare and around tax at the budget, and the spending review later this year.”
Keep up with all the latest news from the UK and around the world by following Sky News
Earlier in the day the chancellor announced a swathe of spending cuts, including to the winter fuel payment, which will now only go to those in receipt of pension credit.
She also announced that adult social care charging reforms, which had been delayed by the previous government, would also not go forward on Labour’s watch, in a move that will save more than £1bn by the end of next year.
Ms Reeves’s statement came after the news that junior doctors had been offered a 22.3% pay rise by the government to end strike action.
Asked by Sky News’ deputy political editor Sam Coates how she could justify taking some winter fuel payments from pensioners while handing 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 “has real costs as well”.
She said cancelled appointments as a result of strikes affect “everybody in society but perhaps the oldest members of our society are affected the most”.
Please use Chrome browser for a more accessible video player
Reeves announces spending cuts
“I also understand why Age UK are disappointed,” the chancellor continued.
“It’s not an easy decision to announce that winter fuel payment would only go to people receiving pension credit.
“But it’s the right decision in the circumstances in which we find ourselves to ensure that pension credit continues to go to the poorest pensioners.”
Ms Reeves said she was being forced to take the “difficult” decisions because of the “unforgivable” inheritance Labour had picked up from the Conservative government, whom she accused of giving “false hope” to Britain.
Analysis:
If Badenoch becomes Tory leader, it’ll be a bumpy ride
Tory battle will be a post-mortem for defeated party
Please use Chrome browser for a more accessible video player
Hunt: Chancellor’s argument ‘not credible’
In response, shadow chancellor Jeremy Hunt accused Ms Reeves of carrying out a “political” rather than “economic” exercise with her statement, which he branded a “shameless attempt to lay the grounds for tax rises she didn’t have 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 find out the state of public finances as we’ve got the OBR (Office for Budget Responsibility) now’.”
Mr Hunt cited economic expert Paul Johnson, of the Institute for Fiscal Studies, and said the state of public finances “were apparent pre-election to anyone who cared to look – which is why he and other independent figures say her argument is not credible and won’t wash”.
He added: “She wants to blame the last Conservative government for tax rises and project cancellations she’s been planning all along.”