British finance minister Rachel Reeves is eyeing tax rises and spending cuts to a value of around 40 billion pounds ($52 billion), two government sources said, after she was quoted as saying there was a "big gap" to be filled in the budget.
The non-partisan Institute for Fiscal Studies said last week that Reeves may need to announce a 25 billion pound ($32.5 billion) tax rise to shore up public services on Oct. 30, her first budget statement since Labour's July election victory.
Asked if this figure was accurate, Reeves told the New Statesman magazine in an interview published on Wednesday the situation was worse than that as that projection did not take into account a 22 billion pound hole identified by the government in July, and how some fiscal pressures would recur in future years.
"There's a big gap," she was quoted as saying when asked if the amount she needed to raise was closer to 50 billion pounds. "But I don’t think this comes as any surprise to the British people."
Two government sources told Reuters Reeves was looking at introducing tax rises and spending cuts to the tune of 40 billion pounds, as she looks to put investment into services while stabilising the fiscal situation. The figure was first reported by the Times and the Financial Times newspapers.
At a meeting of Prime Minister Keir Starmer's ministerial team on Tuesday, Reeves said that the 22 billion pound black hole "needed to be filled just to keep public services standing still", a Labour spokesperson said.
"The Chancellor said that the scale of inheritance meant there would have to be difficult decisions on spending, welfare, and tax," the spokesperson added, also saying that the budget would deliver on spending priorities such as fixing the National Health Service.
Reeves must plot how to fill the fiscal gap while sticking to a manifesto pledge not to raise VAT sales tax or the income tax and national insurance social security tax paid by workers.
However, she and Starmer have not ruled out an increase in the national insurance contributions paid by employers.
They have blamed the previous Conservative government for a dire fiscal inheritance, but also vowed there will be no return to austerity measures characterised by sharp spending cuts. The Conservative Party says the allegation is a smokescreen for Labour's public pay awards and a pretext for tax rises.
($1 = 0.7686 pounds)
