UK (Parliament Politics Magazine) – Labour’s Heidi Alexander signals shift on taxes, saying Labour will act with “fairness”, fuelling speculation over middle-class tax hikes this autumn.
As reported by The Telegraph, Labour has signalled a possible income tax rise in the autumn Budget.
What did Heidi Alexander say about tax rises in the budget?
The Transport Secretary, Heidi Alexander, said the Government had pledged not to raise taxes on those earning average incomes.
During an interview on Sky News, she said,
“I think your viewers would be surprised if we didn’t recognise that at the Budget the Chancellor will need to look at the OBR (Office for Budget Responsibility) forecast that is given to her and will make decisions in line with the fiscal rules that she has set out.”
Ms Alexander stated,
“We made a commitment in our manifesto not to be putting up taxes on people on modest incomes, working people. We have stuck to that. We haven’t put up income tax. We haven’t put up VAT apart from taking away those VAT tax reliefs that people who send their children to private school get, and we obviously haven’t put up employee National Insurance.”
When asked about potential tax hikes in the autumn Budget, she said,
“So the Chancellor will set her Budget. I’m not going to sit in a TV studio today and speculate on what the contents of that Budget might be. We are determined when it comes to taxation, fairness is going to be our guiding principle.”
When asked if taxes could rise in October, the minister said “fairness” would be the principle guiding the Government’s decisions on taxation.
What did Chris Philp say about Heidi Alexander’s tax remarks?
Shadow Home Secretary Chris Philp criticised Heidi Alexander’s call for more “fairness” in tax policy, saying she had issued a “barely-disguised reference to tax rises coming in the autumn.”
He claimed tax increases were being considered due to the economy shrinking for several months and a 12% rise in unemployment since Labour took office.
Mr Philip said,
“They can’t get anything past their own back benches. The consequence of all of that is going to be tax rises for people who are working hard and for businesses. It’s nothing to do with fairness, it’s a symptom of Labour failure.”
What did Eluned Morgan say about wealth taxes?
Eluned Morgan, the Welsh First Minister, added pressure on Sir Keir Starmer by supporting the idea of wealth taxes, calling them “not a bad idea.”
She added,
“I think that people with the broadest shoulders should carry more of the burden. I don’t know all of the levers available, but the idea of taxing people earning over £10 million is not a bad idea.”
What did rising wage inflation mean under frozen tax limits?
Taxpayers may end up paying more, not because of new increases, but because of policy drift. If Rachel Reeves keeps tax thresholds frozen beyond 2028, millions could face higher bills without seeing a rise in their real earnings.
More workers are set to face the top tax rate, with 8.66 million expected to be drawn into the net if the £125,140 threshold remains frozen for another five years.
How is Labour responding to pressure over tax and spending?
Sir Keir Starmer faces growing calls from Labour backbenchers to consider a wealth tax and allow the Chancellor to ease strict fiscal limits.
The Government maintains its position on strict fiscal rules, yet some ministers are now expressing support for a possible wealth tax.
A Number 10 spokesperson said the Prime Minister is “committed to the wealthiest in society paying their share in tax.”
In April, Chancellor Rachel Reeves dismissed the idea of a wealth tax, stating, “We’re not interested in a wealth tax.”
Mr Starmer’s pledge in Labour’s manifesto ruled out tax hikes on “working people,” including income tax, VAT, and National Insurance.
The Government faced criticism for breaking its promise when it raised employers’ National Insurance in the Chancellor’s first Budget.
According to ministers, the hike did not breach the pledge on taxing “working people,” as the burden was placed on employers, not employees.
However, the IFS and other critics pushed back, saying the move did in fact represent a shift in policy.
The Labour leader reaffirmed the party’s commitment to keeping those taxes unchanged, as recently as last Wednesday.
Labour’s U-turn on welfare reforms
The Government now faces a growing gap in public finances after being forced to U-turn on welfare cuts due to pressure from Labour backbenchers.
The planned welfare changes were expected to save £5 billion annually, but the IFS now estimates the savings will amount to just £2 billion.
The U-turn followed an earlier reversal by Ms. Reeves on winter fuel support for pensioners, a move expected to cost over £1 billion.
The Chancellor’s failed plans in ruins have sparked fresh concern over how the government will cover the funding gap, with tax increases now seen as a likely option.
What did Ashwin Kumar say about a wealth tax?
Ashwin Kumar, director of the IPPR think-tank, said,
“The starting point is that a wealth tax could not be implemented very quickly, because you would need to set up an asset register so that the Government knows exactly what it is taxing.”
What did Adam Corbett say about fixing the system?
Adam Corbett, the principal economist at the Resolution Foundation, said,
“It is better to fix the existing wealth-related taxes that we have than to invent a new one.”
He stated,
“Treasury officials are examining several alternative revenue-raising measures beyond traditional wealth taxes. Alfie Stirling of the Joseph Rowntree Foundation suggested broadening national insurance to include investment income such as rent, dividends, and pensions, which could generate £20 billion annually.”
Mr Corbett said,
“Our view is that the first thing we should do is look to iron out the unequal tax treatment of different types of income.”
He added,
“I think it is possible to raise a significant number of billions of pounds from wealth-related tax changes on the very wealthy, and in ways that actually improve the tax system rather than worsen it.”