Rachel Reeves was last night urged to keep her promise not to hike taxes again amid fears more raids are on the way.
The Chancellor will unveil big spending cuts to some departments on Wednesday as she looks to plug a black hole in the public finances of as much as £60 billion.
But there are growing fears that the cuts, part of her spending review, won’t be enough and she will be forced into another round of tax hikes this autumn.
Ms Reeves has already come under fire for hiking employers’ National Insurance in last year’s autumn Budget as part of a wider £40 billion tax raid.
It came as she was still locked in talks with Home Secretary Yvette Cooper about planned cuts. Ms Cooper’s department is among those expected to take the brunt of this week’s cuts despite police chiefs warning of ‘far-reaching consequences’ on their ability to fight crime.
Last night Housing Secretary Angela Rayner resolved a similar clash with the Chancellor, reaching an agreement over the settlement for her department.
However, Ms Cooper was still holding out against police cuts, with negotiations expected to go down to the wire ahead of Wednesday’s spending review.
While some departments are facing cuts, others are in line for cash injections, with an extra £30 billion earmarked for the NHS and £4.5 billion for schools.
The Chancellor will unveil big spending cuts to some departments on Wednesday as she looks to plug a black hole in the public finances
However there are growing fears that the cuts won’t be enough and she will be forced into another round of tax hikes
Separately, there is expected to be £86 billion of spending announced for infrastructure investment. This includes Britain’s fastest-growing sectors, such as technology and sciences.
Alongside demands from Nato bosses to spend more on defence, and following a U-turn over the winter fuel allowance and hints the two-child benefit cap will be lifted, there are growing fears Ms Reeves will have no choice but to hike taxes again later in the year to balance the books.
This is despite her repeatedly promising after last year’s Budget that ‘we’re not going to be coming back with more tax increases’.
Sir Mel Stride, the Tory Shadow Chancellor, said: ‘Rachel Reeves has maxed out the country’s credit card, hiked taxes to record levels and sent borrowing sky-rocketing. It now seems inevitable she will do what Labour Chancellors always do and raise taxes the first chance she gets.’
Sam Miley, an economist at forecasters the Centre for Economics and Business Research, said: ‘Borrowing is running higher than expected and the growth outlook remains poor.
‘I’d expect there to be a focus on stealth taxes, such as maintaining the freeze on allowances. This would raise revenue from —employees, without breaking commitments regarding rates of income tax.’
The Chancellor has repeatedly promised after last year’s Budget that ‘we’re not going to be coming back with more tax increases’
The thresholds around National Insurance and income tax are frozen until 2027-28. It means millions more are being dragged into paying higher rates of income tax as inflation – currently around 3.5 per cent – fuels wage increases.
It is understood Ms Reeves is being urged by Treasury officials to look at extending this by two years to 2030 this autumn.
A Treasury spokesman said: ‘This Government inherited the previous government’s policy of frozen tax thresholds. The Chancellor has announced that we would not extend that freeze.
‘We are also protecting payslips for working people by keeping our promise to not raise the basic, higher or additional rates of income tax, employee National Insurance or VAT.’
