People will not face higher taxes on their payslips after the budget, a cabinet minister said, as she refused to be drawn on what measures could be in the £40bn revenue raiser.
Education Secretary Bridget Phillipson repeatedly said she could not speculate on how Chancellor Rachel Reeves intends to fill the black hole in the nation’s finances, which is understood to be more than double it was previously thought.
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Labour said in its manifesto that it will not raise national insurance, income tax or VAT on “working people” – but it is not clear exactly who that means.
Ms Phillipson told Sky News it is someone “whose main income arises from the fact that they go out to work every day”.
However, she refused to say whether it meant someone who does this and also has savings, telling Sunday Morning With Trevor Phillips: “You’re once again asking me to speculate on matters that are for the chancellor.”
She added: “We set out in our manifesto that we would not be increasing VAT, national insurance or income tax on working people. We will hold to that. And in the payslips that they see after the budget, they will not face higher taxes.”
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Government sources were later forced to clarify that the promise was valid right up to the next election, after the education secretary appeared to fumble her lines on the matter.
There was further confusion over remarks she gave to the BBC’s Sunday With Laura Kuenssberg programme, when she declined to say whether a small business owner with an average net profit of around £13,000 is considered a “working person” by the government.
She acknowledged it is “frustrating” she can’t talk about the budget, but said “that’s not my job – that’s for the chancellor”.
While ministers have remained tight-lipped about the fiscal event next week, it is thought capital gains tax, fuel duty and inheritance tax are some of the levers Ms Reeves could pull.
In recent weeks, ministers have said their commitment not to raise national insurance only applied to the worker element, fuelling speculation that the employer part of this levy could also go up.
It has emerged the government is looking to fill a £40bn shortfall, more than double the £22bn black hole they had previously warned about and used to justify the cut to winter fuel payments.
Paul Johnson, director of the Institute for Fiscal Studies, told Sky News if that is the case Wednesday’s fiscal event will be “certainly one of the biggest tax rising budgets in history”.
The Conservatives have accused Labour of misleading the public during the election campaign with their economic plans.
Gareth Davies, the shadow exchequer secretary, said: “Labour are not keeping their word. They’re attempting to pull the wool over the public’s eyes – but it won’t work.”
He accused Labour of breaking their manifesto promises not only by raising taxes but also by “fiddling the figures to whack up borrowing” despite vowing not to change their fiscal rules.
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It comes after Ms Reeves confirmed that she will change her definition of debt to allow her to borrow more to invest.
Speaking to Sky News earlier this week, she said the self-imposed fiscal rule under which borrowing must be falling by the fifth year of economic forecasts will be redefined from the current measure of public sector net debt.
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Former Bank of England governor Mervyn King warned the move could lead to people’s grandchildren shouldering the burden of national debt in the years to come, and Ms Reeves should “demonstrate how that higher borrowing in the short term is going to be constrained in the future”, such as through higher taxes.
He advised Ms Reeves to be “open and honest” about what the higher borrowing will deliver because “it’s the merits of the spending that will determine whether or not people are willing to accept higher taxes in order to see the benefits”.
