REEVES HINTS AT MORE TAX RISE PAIN

RACHEL Reeves may target millions of middle earners with punishing income tax hikes as she is forced to clear up Labour's welfare mess.

- By Martyn Brown Political Editor

The Chancellor could also put VAT and National Insurance in her crosshairs as experts predicted she needs to plug a black hole of up to £40billion.

She has admitted there would be "a cost" to this week's humiliating U-turn on welfare reform, which she said would be "reflected in the Budget".

She has insisted she will not change her fiscal rules, leaving tax rises as the most likely option.

It is the clearest hint yet that taxpayers are set to be penalised for the Government's capitulation to Labour MPs opposed to any attempt to bring Britain's bloated benefits bill under control.

Economists have warned that the looming crisis could leave the Chancellor with an eye-popping £30 or even more to find. That is equal to the sum brought in by her record tax-raising Budget in 2024, which she promised not to repeat.

Paul Johnson, the outgoing director of the Institute for Fiscal Studies, said the only way for the Chancellor to raise "big money" was to target income tax, national insurance and VAT for middle-income earners.