Some taxes to rise in October 30 budget, says Rachel Reeves | Taxes and spending

Taxes are set to rise in the Labour government’s first budget, Chancellor Rachel Reeves has said.

Speaking on the News Agents podcast, Reeves refused to rule out increases to inheritance tax, capital gains tax or pension changes.

“I think we will have to raise taxes in the budget,” she told the podcast, but she ruled out raising social security contributions, VAT or income tax. Labour’s manifesto pledged not to raise all three taxes this parliamentary term.

The budget will be presented on October 30 and Ms Reeves warned that “more difficult decisions are going to be made.” Her comments are likely to be echoed by Conservatives who have accused Ms Reeves of laying the groundwork for tax hikes.

In a statement to MPs on Monday, the Chancellor accused the last Conservative government of leaving a £22bn black hole in the public finances. She claimed that Jeremy Hunt, the former Chancellor, had lied to Parliament and the country about the state of public spending.

“Jeremy Hunt has concealed from the House of Commons and from the country the true state of the public finances. He did so knowingly and deliberately,” she told Sky News on Tuesday. “He lied, and they lied during the election campaign about the state of the public finances.”

Hunt vigorously denied the allegations and wrote to Simon Case, the cabinet secretary and head of the British civil service, disputing the government’s assessment.

Citing a £22bn deficit, Reeves abandoned a series of Conservative policies including a long-awaited cap on social care costs, plans to build 40 hospitals and various road projects.

Reeves also cut winter heating benefits for 10 million pensioners by means testing the allowance, prompting criticism from charities. The number of pensioners receiving the winter heating benefit will be reduced from 11.4 million to 1.5 million.

It was also pointed out that almost half of the deficit cited by Reeves, £9.4bn, was the result of his decision to fully fund above-inflation public sector pay recommendations and offer junior doctors a 22.3% pay rise over two years to end their strike.

Speaking to reporters, Keanu Reeves said public sector workers deserved a pay rise and were getting one on par with the private sector. She said the deal offered to junior doctors would cost £350 million, a “drop in the ocean” compared to the £1.7 billion spent on strikes last year.

She told Times Radio: “It was the previous government that gave the independent pay review bodies the task and, extraordinarily, this year they did not include in that task a figure for what was affordable. We didn’t know. I didn’t know until I became chancellor on 5 July.”

The government has also decided to abandon long-awaited welfare reforms. Andrew Dilnot, who drafted the proposals in 2011, said the decision was a “tragedy” and would further delay much-needed changes to the system.

Asked on the News Agents podcast if she agreed that it was a tragedy, Reeves said: “Yes, it is. But the blame has to go to the Conservative Party because if we hadn’t acted, this is what would have happened. We would have had economic and financial instability similar to what we had when Liz Truss was prime minister.”

“The alternative was economic instability, with financial markets in turmoil, interest rates exploding, mortgages and rents exploding. I’m not prepared to take that risk – economic stability must always come first.”

She said Wes Streeting would continue his plans to work with the health and care sector to reform social care.