Keir Starmer refuses to rule out further tax rises and spending cuts next month. The Reason Will Shock You

Rachel Reeves, the Chancellor, is reportedly considering a “stealth tax rise” as she prepares for the upcoming Spring Statement on March 26. This comes as she faces the challenge of addressing a significant fiscal shortfall and navigating a struggling economy.

One of the options being explored is extending the freeze on income tax thresholds beyond 2028-9. This move could push more people into higher tax brackets as wages rise, effectively increasing tax revenue without explicitly raising tax rates.

Last year’s Budget included significant tax increases, totaling £40 billion, and at the time, Reeves assured taxpayers that she would not introduce further tax hikes.

However, with the economy still under pressure—marked by rising borrowing costs, high inflation, and sluggish growth—Reeves is under pressure to find ways to stabilize public finances. This has led to speculation that she may need to revisit her earlier promises.

Sir Keir Starmer, the Labour leader, has been cautious in his comments about potential tax rises or spending cuts. While speaking to reporters, he emphasized that major decisions on tax were made in last year’s Budget but did not rule out further changes in the upcoming Spring Statement.

He stated, “We are at the early stages of that, and obviously I am not going to get ahead of myself until we have made decisions.” He added that the focus would remain on minimizing public spending if necessary.

The Institute for Fiscal Studies (IFS), a leading economic think tank, has suggested that extending the income tax threshold freeze could generate an additional £4 billion annually, especially if National Insurance brackets are also frozen.

Paul Johnson, the head of the IFS, noted that such a move would be “relatively politically painless” and could provide the government with more financial flexibility. He also pointed out that the freeze could be reversed in the future if economic conditions improve.

Reeves’ team is reportedly considering all options to address the fiscal challenges, with one insider stating that “nothing is off the table.” The Chancellor’s approach appears to be focused on finding ways to balance the books without causing significant public backlash. However, the potential for further tax adjustments or spending cuts has raised concerns among skeptics, who worry about the impact on households already struggling with the cost of living.

As the Spring Statement approaches, all eyes will be on Reeves and her team to see how they plan to address the economic challenges while adhering to their fiscal rules. The decisions made in the coming weeks could have significant implications for taxpayers and the broader economy.