PM signals tax rethink amid £50bn black hole in Budget

Sir Keir Starmer has opened the door to increasing income tax this autumn as he faces growing pressure to fill a £50bn shortfall in the public finances.

- KATE DEVLIN & MILLIE COOKE

Speaking to broadcasters, the prime minister defended his record and insisted Labour had “stabilised the economy” since it came to power last year, adding that the Budget would “make sure people feel better off”.

However, asked multiple times whether he would explicitly rule out breaking the manifesto pledge of not raising VAT, income tax and corporation tax, he said: “In the autumn, we’ll get the full forecast and obviously set out our Budget.”

It comes less than a month after the prime minister vowed that Labour would not raise the three main taxes. Asked at Prime Minister’s Questions whether he could guarantee that the government would honour the pledge, he gave a simple “yes”.

Leading economists have warned Rachel Reeves that she must raise taxes or tear up her flagship borrowing rules to fill a £50bn black hole left by a combination of Labour U-turns, higher borrowing and sluggish economic growth.

Jonathan Portes, a former Treasury adviser and professor of economics and public policy at King's College London, told The Independent that he believes wealthy pensioners should bear the brunt of any tax rises.

He said: “Obviously there is still a lot of uncertainty about how large tax rises should be. I think the basic principle has to be the tax and pension system needs to be rebalanced so that better-off older people, especially those with substantial property and pension wealth, make a much larger contribution to addressing the fiscal pressures that result from increasing spend on the NHS, social care and pensions. Also it is long past time to raise fuel duty.”