(Bloomberg) — Chancellor of the Exchequer Rachel Reeves said she was wrong to tell British voters before the election that Labour wouldn’t announce new tax increases, even as she assured them there wouldn’t be a repeat of her first budget in the coming years.
Reeves was asked during an interview on Sunday to explain comments from June when she said she had “no plans to increase any taxes beyond those which we have already set out.” Such remarks have come under greater scrutiny since Reeves unveiled the £40 billion ($52 billion) package of revenue-raisers, including some measures such as changes to the payroll levies and inheritance tax that weren’t specially mentioned in the Labour Party’s campaign manifesto.
“I was wrong on the 11th of June,” she said on Sky News, explaining she underestimated the size of the UK’s budget gap. “Just under a month after I said those words, I was taken into a room by the senior officials at the Treasury, and they set out the huge black hole in the public finances.”
Reeves’ appearance on the UK’s Sunday morning talk shows was the latest effort in a media blitz to sell a budget that not only included the biggest tax increase in decades, but a huge rise in borrowing. Concerns about the spending plan’s impact on inflation — and thereby the Bank of England’s path toward rate cuts — prompted a two-day sell off in government bonds last week before prices stabilized on Friday.
Her comments on Sunday represent Reeves’ most candid admission yet that Labour had gone further on taxes than she and Prime Minister Keir Starmer signaled before the July 4 election. Weeks after taking power, the UK’s first female chancellor disclosed what she said was a £22 billion spending gap left by the outgoing Conservative government, raising the stakes for Labour’s first budget in 14 years.
Nevertheless, Reeves insisted that she could avoid announcing another similar spending plan before the next election, despite concerns from some ministers that their departments remain short of funding. Economists have predicted that the chancellor may need to come back with more tax rises to avoid a return to austerity for many government departments later in the parliamentary term.
“There is no need to come back with another budget like this,” Reeves told Sky News, adding that she hoped to have “wiped the slate clean” with last week’s program. “We never need to do that again.”
Starmer and Reeves will have to contend with a more assertive opposition after the Conservatives elected former Business Secretary Kemi Badenoch as its leader. Badenoch indicated during an interview with the BBC that she would seek to reclaim their mantel as the party of lower taxes.