Reeves’ Budget Battle: Tax Hikes and Fuel Cuts Spark Controversy Ahead of Winter

Rachel Reeves faces criticism regarding taxes and energy costs. While the public may accept higher taxes for the wealthy, the chancellor should be cautious not to appear overly stingy during the winter season.

Senior political reporter @joncraig

Wednesday, August 28, 2024, at 8

Rachel Reeves is set to present her initial budget on October 30, yet she is already encountering significant political challenges from two different directions, even though the date is still over two months away.

Conservatives argue that the upcoming financial announcement will spell trouble for middle-income families and "Middle England," amid speculation of increased inheritance and capital gains taxes.

The chancellor is also dealing with significant opposition from Labour backbenchers regarding her decision to cut winter fuel payments of up to £300, limiting them to only the most financially struggling pensioners.

Live Politics: 'Minimal Information' on UK-Germany Agreement

Despite the mounting criticism surrounding her on both issues, the woman who views herself as an "iron chancellor" remains steadfast, showing no indication of yielding.

Following Sir Keir Starmer's forewarning of a "painful" budget, as one headline captured it, "I never promised you a rose garden," she declined three times to dismiss the anticipated tax increases.

Stay informed on the most recent updates from the UK and globally by tuning into Sky News.

During a tense interview in Scotland, the conversation unfolded as follows:

Further Insights on Energy

A newly proposed wind farm in Shetland has the potential to supply electricity to half a million

Industry leader cautions that consumers are in debt for billions to utility companies as challenging winter approaches.

90-year-old reports he must limit himself to weekly showers due to the cessation of government fuel subsidies and rising energy costs.

Associated Subjects:

"Is it possible to dismiss the idea of increasing inheritance tax and capital gains tax in the upcoming budget?"

"I won't prepare a budget two months before it's due."

"Is it something you can dismiss?"

"We'll need to tackle a range of tough choices…"

"Is it something you can't dismiss?"

"I will present the budget on October 30."

👉 Click here to subscribe to the Sky News Daily podcast for a 20-minute daily update on the top stories 👈

In reaction to the interview, ex-Conservative Chancellor Jeremy Hunt stated, "During the election, Labour pledged more than 50 times that they would not increase taxes, yet now they seem to be preparing to do exactly that."

To be accurate, the only tax increases that Sir Keir and Ms Reeves definitively dismissed were those affecting income tax, VAT, and national insurance. However, they avoided providing clear answers on potential changes to inheritance tax and capital gains tax throughout their campaign.

However, it's not only the issue of tax increases where the Conservatives, along with numerous Labour MPs, are ready to challenge the Chancellor when Parliament reconvenes in Westminster the following week.

Rishi Sunak has signaled that the Conservative Party will push for a vote in the House of Commons to overturn the reduction in winter fuel payments.

The government is expected to employ numerous strategies to dodge a vote, sparking significant anger among Labour's rank and file, including beyond the usual hard-left dissenters.

Stay ahead with the latest breaking news updates.

Download the Sky News application at no cost

Both disputes share a common thread, with the prime minister and chancellor pointing fingers at a £22 billion deficit in the national budget, which they assert was left by the previous Conservative leadership.

"Ms. Reeves repeatedly stated in her contentious interview in Glasgow that the previous Conservative government had concealed £22 billion in spending, leaving a substantial deficit for the current year."

Discover further: What tax increases might the Labour Party consider? Analysis: Amid a grim outlook, Starmer must demonstrate advancement.

However, a recent YouGov survey indicated that while voters may accept increased taxes targeting the wealthy, including inheritance and capital gains taxes, the decision to remove the winter fuel allowance from as many as 10 million pensioners is increasingly being seen as a significant political mistake.

Ms. Reeves not only views herself as embodying the stern, disciplined qualities of a Labour "iron chancellor" akin to Gordon Brown, but it is also said that during her university days in the late 1990s, she kept a framed photograph of Chancellor Brown on her wall.

It's important to remember that it was Mr. Brown who initiated the winter fuel allowance back in 1997. Following his tenure, seven consecutive Conservative chancellors, ranging from George Osborne to Jeremy Hunt, have maintained this benefit, even throughout the years of Conservative-led austerity.

Ms. Reeves should take note of Mr. Brown's mistake in 1999 when he raised the state pension by a mere 75p, a decision that ultimately led to an embarrassing reversal.

For an enhanced viewing experience, it's recommended to utilize the Chrome browser.

Following Sir Keir's recent advocacy for "short-term sacrifice for long-term benefit," Labour's prominent supporter in Fleet Street, the Daily Mirror, stated in its editorial: "The moment has come for a change in fuel policies."

Columnist Kevin Maguire from Mirror disclosed that the newspaper received an overwhelming number of letters, noting, "This is an opportunity for Starmer and Reeves to pay attention to Denis Healey's primary rule in politics: when you find yourself in a hole, stop digging."

What can the chancellor and prime minister learn from the dual challenges they are confronted with regarding taxes and fuel expenses?

Polling data and correspondence indicate that the public in areas typically referred to as "Middle England" are willing to accept some tax increases for wealthier individuals.

Stories of elderly people suffering from the cold during the holidays will not be popular among the electorate. It's acceptable for a finance minister to be strict with budgeting, but being miserly is a different matter altogether.

Associated Subjects

Sky News Bottom Bar

Information about Sky News

Services Provided by Sky News

Sky Network Channels

Additional Sky Websites