Sir Keir Starmer acknowledged that people who own shares or property “don’t fit into my definition of a working person”.
The Chancellor gave the clearest hint yet about who could be hit by big tax rises in next week’s Budget, saying a working person is “someone who goes out and earns a living, usually in the form of a monthly wage. A cheque”.
But they can’t “cut a cheque to get themselves out of a pinch”, he says.
Labour insists tax rises will not affect working people and has promised not to increase income tax, VAT or National Insurance.
Asked if he would classify people who earn an income from assets such as shares or property as working people, the Chancellor said: “Well, they wouldn’t fit into my definition”. Asked whether that meant those people could see their taxes rise, the Prime Minister said: “I could probably give countless examples…” You ask me to define who a working person is, and then you guess what this tax refers to.
Inheritance tax and capital gains tax, levied on the estates of those who die. Tax on profits from the sale of capital assets are thought to be the two taxes most likely to be increased.
Asked if reports of tax increases would tempt business leaders to leave the UK, Keir told reporters: “There is no reason for them to do so.” The bill also included a pledge not to increase social security contributions, income tax or VAT for working people.
The Chancellor said he faced difficult decisions but insisted the Budget would “start to fix the NHS and rebuild the economy.”
National debt costs rose on speculation the Chancellor would change debt rules to free up billions more for investment.
Former Conservative chancellor Jeremy Hunt said increased borrowing could mean higher mortgage costs for hundreds of thousands of households.
During a series of interviews at the International Monetary Fund conference in Washington, D.C., Reeves confirmed technical changes in how progress towards the debt settlement goal is measured.
Writing in the Financial Times, Reeves said his budget provision will be “a rock of stability at the core of my household finances”.
Labour’s 2024 election manifesto states Reeves will follow two rules: the current budget must be balanced so that current expenses are covered by revenues;
The second rule stipulates that the debt as a share of economic output must fall by the fifth year of the economic forecast;
On Thursday, he confirmed that the way debt is measured as part of that goal will be changed to allow for more flexibility.
Ms. Reeves said, “My budget rule does two things. First and most importantly, my stability rule means that my daily expenses match my income.
“Given the state of the public finances and the need to invest in public services, this rule will have the toughest consequences.
“Importantly, my stability rule also covers interest on the national debt and, unlike the previous administration, I do not intend to cut the investment budget to cover the ongoing operating cost deficits of the ministries.
“My second budget rule, the investment rule, will ensure that the debt on the economy is reduced.
“This will create more room in our economic structure for increased investment and ensure that the cuts in public investment that were planned under the previous government do not happen.”
She told ITV News: “Our second rule: Invest Ourself.” “This rule will change the way we measure public debt so that it takes into account assets and not just investment costs.”
It will target government debt rather than the current measure of underlying public sector net debt which is expected to adopt Public Sector Net Financial Liabilities (PSNFL) as the new benchmark.
The move to PSNFL will give it more breathing room to meet its debt reduction targets as PSNFL incorporates a broader mix of government assets and liabilities and in particular includes expected student loan repayments to offset some of the debt.
According to the Institute for Fiscal Studies, if PSNFL had been used as a debt target in the March 2024 Budget, the “margin” for meeting fiscal rules would have increased by £53 billion.