Former Labour Cabinet minister David Blunkett urges Rachel Reeves to desert plans to focus on personal pensions in subsequent week’s finances

A botched Budget could cost Labour the next election David Blunkett warned yesterday – as he urged Rachel Reeves to abandon plans to target private pensions.

He said that a big fall in Labour’s poll rating since the election – which has seen it lose a string of council by-elections – could become permanent if the October 30 Budget is judged vindictive.

‘The Budget will define whether we continue to lose by-elections dramatically and next year, local elections,’ the former Cabinet minister told the BBC.

‘If you are going to get a second term…then you have to keep a degree of popularity, because once you’ve lost it, as the Tories found out, it takes a very long time to get it back.’

He also criticised Ms Reeves’ and Sir Keir Starmer’s ‘miserabilist’ approach on the economy, saying the UK needs ‘hope, aspiration and energy’.

David Blunkett said that a big fall in Labour’s poll rating since the election could become permanent if the October 30 Budget is judged vindictive

Blunkett has urged Rachel Reeves (pictured) to abandon plans to target private pensions

The former work and pensions secretary also hit out at rumoured plans to levy National Insurance on employers’ pension contributions, as it could lead to ‘rotten pensions’ for millions.

Any move could raise £15 billion, but Lord Blunkett said any impact on auto enrolment schemes was ‘worrying’.

The proposal has caused anger in the private sector due to reports that the government will exempt gold-plated public sector pensions, adding to the existing two-tier divide.

Lord Blunkett also warned against demonising savers and investors.

He said he would support some increases in capital gains tax, but added: ‘We have got to get the balance right as well. Get it wrong and you end up hitting those who have investments and we need investment.

‘We need people who are saving so that other people can borrow and that’s true on a big scale in terms of pension pots.’