Rachel Reeves admitted to journalists last night that taxes will have to go up in the autumn.
The chancellor already announced a series of spending cuts on Monday in a bid to plug the £22bn black hole in the public finances she claims the Tories left behind them in government.
Then, speaking to the News Agents podcast on Tuesday, Reeves suggested that she has yet more difficult decisions to make.
Podcast host Jon Sopel said it was “clear taxes will have to rise” because the country needs to “raise revenue”.
“I think we will have to increase taxes in the Budget,” Reeves replied.
The chancellor has previously confirmed the Budget – usually an annual event meant to outline the state of the economy and the government’s tax plans – will be announced on October 30.
Sopel asked: “And you’re sticking to your commitment of no rises in National Insurance, income tax or VAT?”
Labour pledged in the run-up to the election not to raise these particular taxes.
So presumably that means inheritance tax, pension reform, capital gains tax,” Sopel pushed.
Reeves said Labour’s manifesto included a commitment to fiscal rules, including balancing day-to-day spending through tax receipts and to get debt down as a share of GDP.
But, she refused to say exactly which taxes would be on the cards, only pointing to the Budget on October 30.
“I’m not going to write a Budget or start to write a Budget,” she said.
“You’ve ruled out VAT rises and National Insurance rises,” co-host Emily Maitlis said. “So it might be that there are rises in capital gains tax, in inheritance tax and in pension reform, right?”
But the chancellor refused to be drawn.
Maitlis then suggested Reeves sounded like an austerity chancellor “embodying” George Osborne.
She replied: “Emily, that’s just not true.
“Yesterday, we announced that we were accepting the recommendations of the independent pay review bodies.
“We’re giving pay rises to millions of public sector workers, in many cases, the first real terms increase in pay in a decade.
“So this is not a return to austerity, but it is getting a grip of the public services.
“There’s nothing progressive about losing control of the economy, because we saw what happened when the previous government lost control of the economy.
“And it was ordinary working people on low and middle incomes who lost out when mortgage rates and rents spiralled.
“I’m not going to play fast and loose with the public finances.”
Former chancellor Jeremy Hunt, who now sits in the shadow cabinet, wasted no time in hitting out at Reeves for her remarks on the podcast.
He wrote on X: “By refusing to take the difficult decisions needed, Rachel Reeves will do what she planned all along like every Labour chancellor in history – raise your taxes.”
Hunt, who was pretty furious earlier in the week at Labour’s repeated claims that he had wrecked havoc with the country’s finances, actually took the UK’s tax burden to a 70-year high when he was leading the Treasury.