Rachel Reeves mulling £40bn in tax rises and spending cuts

Chancellor Rachel Reeves is expected to announce £40bn-worth of tax rises and spending cuts in the budget at the end of this month, it has been reported.

That covers the £22bn “blackhole” Reeves previously accused the former government of leaving behind, plus extra to avoid real-terms cuts to departmental spending.

It is thought the chancellor will move to increase some taxes, as well as reduce spending on welfare.

She is widely expected to raise employer national insurance contributions, sparking accusations that Labour was about to break a manifesto pledge not to “increase taxes on working people”.

The SNP has urged the UK Government to conduct a full impact assessment of any such move, warning it could result in pay cuts and job losses.

The party’s economy spokesperson Dave Doogan has written to the chancellor, saying: “While Sir Keir Starmer has claimed this Labour Party jobs tax will not hit workers, there are serious warnings that some businesses could be forced to squeeze or freeze pay, cut back on pension contributions, halt recruitment or lay off workers – if the added cost is too much to absorb.

“There may be employers who end up saying to workers ‘we can't afford to give you a pay increase because of the Labour government's tax hikes’.

“This whole sorry mess once again speaks to the lack of candour from the Labour Party during the UK general election campaign. You promised voters austerity would end under Labour but instead you have imposed billions of pounds of cuts to pensioners and public services – and now you are breaking your promise on hiking national insurance too. 

“Voters feel misled. They were promised change but instead they have been short-changed by the Labour Party.”

Reeves will deliver her budget on Wednesday 30 October. She has pledged there will be “no return to austerity” but the government has also been warning of difficult decisions ahead to get the economy back on track.

Later this evening, Reeves will address a summit of business leaders. She will tell them the government will do “all we can to drive growth” and that entrepreneurs “have a friend in me”.

She will add: “The UK is open for business, and it is open to business. We welcome investment into companies of all sizes, big and small.

“Our aim with all of this is crystal clear: to drive growth. And we must all work in partnership to deliver that.”

But a survey published by the Scottish Chambers of Commerce yesterday found 55 per cent of businesses were concerned about potential tax increases.

Vice-president Douglas Smith said: “Businesses understand that the fiscal backdrop for the chancellor is challenging. We are willing to work in partnership to overcome these challenges and help grow the economy. However, any changes made must not be at the expense of investment and growth.”