Keir Starmer gives 'tough' Budget warning but doesn't rule out some tax rises

The Prime Minister has warned that the forthcoming Budget will be 'tough' - and declined to rule out increasing employers' national insurance contributions.

Sir Keir Starmer insisted Labour would keep its promise not to raise taxes on “working people” but, in an interview with the BBC, warned again that October 30 would bring a “tough” Budget.

It comes amid speculation that Chancellor Rachel Reeves could announce more tax rises than those included in Labour’s manifesto. That manifesto included a promise not to raise taxes on “working people”, including income tax, VAT and national insurance.

But the Government has faced questions on whether the commitment not to raise national insurance covered employers’ contributions as well as those by employees.

On Tuesday, Sir Keir declined to rule out raising employers’ contributions, saying Labour had been “very clear in the manifesto that we wouldn’t be increasing tax on working people”.

He added: “It wasn’t just the manifesto, we said it repeatedly in the campaign and we intend to keep the promises that we made in our manifesto.”

Ms Reeves faces a difficult challenge when she announces her first Budget at the end of the month and needs to square the Government’s promises on taxation with a commitment to keep borrowing under control and avoid a return to austerity.

She will also want to find further ways of closing the £22 billion “black hole” caused by significant overspends in this year’s budget, with much of that pressure likely to persist throughout the Parliament.

Experts have argued that ministers need to find £20 billion to avoid cuts to so-called “unprotected” departments pencilled in by their Conservative predecessors, along with billions more to prevent a sharp fall in investment spending.

Some of that could come from changing the measure the Government uses to calculate debt but Resolution Foundation economist Cara Pacitti warned on Monday that tax rises were “all but inevitable” to prevent cuts to day-to-day spending.

Ministers have so far largely declined to comment on speculation about possible tax rises but Sir Keir said on Monday that suggestions capital gains tax could increase to 39% were “wide of the mark”.