Starmer warns that Brits face greater taxes FOREVER and he may elevate them AGAIN to prop up the NHS and public providers as a result of the Budget should confront ‘harsh fiscal actuality’

Keir Starmer today made clear there is no prospect of taxes coming down again after the looming Budget raid.  

The PM said the idea that governments can ‘lower taxes and that your public services will run properly’ had been exposed as a ‘fiction’.

Signalling a shift to a Scandinavian-style higher burden, Sir Keir argued in a speech that the country had voted for ‘change’. 

The comments came as the premier admitted there is ‘tough stuff’ coming in Chancellor Rachel Reeves‘ first fiscal package on Wednesday.

It is expected to bring in a massive £35billion a year extra for the Treasury – one of the biggest ever Budget tax raids.

Strikingly, Sir Keir refused to rule out the government coming back to milk more cash. 

Instead he appealed for voters to give Labour time to ‘rebuild the foundations’ despite the brutal assault on their pockets. 

In one specific announcement, the PM confirmed that the £2 cap on bus fares will rise to £3. There was also a hint that motorists might be spared the pain of at least some of a mooted 7p rise in fuel duty.

Critics have dismissed claims from ministers that ordinary ‘working people’ will not see the impact in payslips, because most of the pain will be initially targeted at businesses and the wealthier.

The Tories said it was clear Labour ‘wasn’t straight with the British people’ about their intentions before the election. 

Keir Starmer will today demand Brits face up to ‘harsh reality’ ahead of looming tax hikes in the Budget

Speaker rebukes Reeves over Budget briefing 

Lindsay Hoyle has rebuked Chancellor Rachel Reeves for not telling the Commons first about her intention to change the Government’s fiscal rules.

The Speaker swiped that MPs were concerned about how to get a seat in the chamber on Wednesday. 

‘To be quite honest, the way it’s going you won’t need to, we’ll have all have heard it,’ he said. 

‘It’s not acceptable, I don’t want it to continue and I want to treat this House with the respect it deserves.’

Sir Lindsay added: ‘It’s totally unacceptable to go around the world telling everybody rather than these Members. They were elected by the constituents of this country and they deserve to be treated better.

‘Isn’t it funny that when it was the previous party, it was the opposite side that was complaining to me. Get your acts together, all sides, treat Members with respect.’

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A major increase to employers’ national insurance contributions looks set to be the centrepiece of the big post-election package.

There are also likely to be attacks on inheritance tax, capital gains and pension pots. 

The Labour election manifesto used the term ‘working people’ as it laid out who would be protected from increases. 

But Sir Keir sparked fury last week by suggesting landlords, shareholders and savers did not count.

Education Secretary Bridget Phillipson struggled yesterday on whether small business owners making just £13,000 a year were ‘working people’.

And the premier tried to avoid a definition entirely this morning, merely insisting ‘the working people of this country know exactly who they are’. 

In his speech, Sir Keir said: ‘We have to be realistic about where we are as a country. This is not 1997, when the economy was decent but public services were on their knees.

‘And it’s not 2010, where public services were strong, but the public finances were weak. These are unprecedented circumstances.

‘And that’s before we even get to the long-term challenges ignored for 14 years: an economy riddled with weakness on productivity and investment, a state that needs urgent modernisation to face down the challenge of a volatile world.’

The PM denied he is using the UK’s problems as ‘an excuse’, despite repeatedly putting the blame on the Tories.

‘Politics is always a choice. It’s time to choose a clear path, and embrace the harsh light of fiscal reality so we can come together behind a credible, long-term plan,’ he said.

Challenged that most voters would prefer lower taxes rather than investment in public services, the PM said: ‘No. I think for too long, we pretended that you could lower tax and spend more on your public services, but you can’t. And it’s about time we faced up to that.’

He added: ‘Almost everybody knows the NHS is broken. We’re going to fix it, put it back on his feet, and make it something we can be proud of again.

‘That’s the path we’re choosing, and that’s what we’ll deliver for working people.

‘But what we’re not going to do is continue the fiction that got us here in the first place, the pretence that you can always have lower taxes and that your public services will run properly.

‘Because the last 14 years have shown this is completely and utterly untrue, and people voted for change.’

The UK still has a lower tax to GDP burden than countries such as Sweden and France, but the level has spiked significantly since Covid.

Ms Reeves’ hikes are expected to take the ratio to a new high since records began in 1948. Although figures before that are not directly comparable, that appears to be the highest ever.   

Sir Keir said local services to ‘get Britain working’ will benefit from a £240million funding boost in the Budget.

He said: ‘Rebuilding Britain and delivering growth will take the skills and effort of all of us.

‘That’s why this Budget will also get Britain working. It will pave the way for reforms that tackle the root causes for economic inactivity and make sure that those who can work do work.

‘As a Labour Government, we will always help those who cannot support themselves, but the UK is the only G7 country for whom inactivity is still higher than it was before Covid.

‘And that’s not just bad for our economy, it’s also bad for all those who are locked out of opportunity.

‘So the Chancellor will announce £240 million in funding to provide local services that can help people back into work and the dignity that that brings.’

Shadow Treasury Chief Secretary Laura Trott said: ‘Rachel Reeves said during the election campaign that Labour’s plans ‘don’t require any further increases in taxes’ other than the tax rises set out in Labour’s manifesto. Keir Starmer confirmed today that this wasn’t true.

‘The Budget Labour are about to deliver is the one they planned all along and Labour simply weren’t straight with the British people about it during the election campaign.’

NICs is charged at different rates for employers, employees and the self-employed

Sir Keir and Rachel Reeves together at the Labour conference last year

Earlier, Chancellor of the Duchy of Lancaster Pat McFadden told Times Radio that the Government ‘levelled with people’ before the Budget.

‘There’s no point in telling people everything’s absolutely fine when the prison system is in a state of collapse, when NHS waiting lists are at a record high, when we’ve got crumbling schools,’ he said.

‘There’s so much that’s wrong that we’ve got to fix and it’s important to set that out honestly and candidly for the public.’

He added: ‘I think we’ll have the most honest Budget on Wednesday that we’ve had for some years.’

What taxes will Labour hike? 

VAT on private school fees and non-dom crackdown – likelihood 10/10

The Labour manifesto committed to scrapping non-dom status, adding VAT to private school fees and increasing stamp duty on buyers from abroad. 

The party estimated the VAT move would bring in £1.5billion by 2028, while the other tweaks were projected to bring in billions more together with a vague squeeze on ‘tax avoidance’.

However, questions have been raised about the revenue predictions, with warnings that wealthy people will simply leave the country.

Employer national insurance – 9/10

Rachel Reeves looks almost certain to increase employer NICs, despite claims it is a ‘straightforward breach’ of the Labour manifesto.

The Chancellor now seems to be leaning towards hiking the main rate and lowering the threshold when it starts being paid, rather than imposing the levy on contributions made to pensions for the first time.

The measures could raise up to £20billion a year. 

There had been alarm from Labour big beasts about a more direct raid on pension pots, with fears firms would be unable to compensate for the extra charges, and retirement funds would simply end up smaller. 

Tax thresholds – 8/10 

Tax thresholds have been frozen since 2021, and are due to stay so until 2028.

Jeremy Hunt also decided to reduce the top rate mark from £150,000 to £125,000.

The OBR has estimated that the policy will bring 3.8million more people into the tax system through ‘fiscal drag’ – where incomes rise to account for inflation but tax thresholds stay the same in cash terms. 

Some 2.7million more are expected to pay the higher 40p rate, and 600,000 extra the 45p top rate.

The OBR projected that the Government’s tax revenues will be boosted by an enormous £41billion a year as a result.

However, there are claims that Ms Reeves is set to extend the freeze again. That would give her an additional £7billion in the final year of the fiscal forecast – when the books have to be balanced. 

Capital gains – 8/10

Ms Reeves could hit profits on sales of shares and other assets, which currently face a 20 per cent levy – or 10 per cent when people sell businesses. 

Labour appears to have backed off big moves on the headline rate, or second properties. 

HMRC estimates that a one percentage point increase in the higher rate of capital gains tax would raise just £100million.

But a 10 percentage point increase or more – as has been mooted in some quarters – could actually cut revenue because so many investors would take action such as delaying sales or quitting the UK.

The IFS has suggested that attacking business asset disposal relief (BAD) – a preferential CGT rate for business owners – could bring in £1.5billion. 

So-called ‘uplift at death’ could also be in the crosshairs. It means that assets such as businesses owned when someone dies are valued for tax purposes from the date when they were acquired, rather than at the date of death.

The asset is, however, inherited at current value. Getting rid of that benefit could bring in £1.6billion.

Inheritance tax – 7/10

IHT is charged at 40 per cent on estates worth over £325,000, but that level can rise to £1million for a couple passing property to children.

Abolishing that loophole could potentially raise £2billion a year.

Pension pots – 7/10 

Think-tanks have floated cutting the amount people can draw out of pensions tax-free from £286,275 to £100,000.

Such a change would raise around £2billion a year. 

It would affect about one in five retirees.

People could also be restricted from passing on pension pots to relatives.

Retirement savings are treated generously by the taxman when people die at present, especially if that is before age 75.

They have therefore become widely used in inheritance tax planning, and are often spent last if at all.

Options open to the Government include making pension assets liable for inheritance tax, and levying a charge on them at death.

Pension and tax experts predict a crackdown would lead to a rise in gifting, and perhaps greater use of trusts and insurance products.

Share dividends – 6/10

The dividend allowance means the first £500 received by an investor in a year is tax-free. 

But Ms Reeves could opt to scrap that relief, arguing that investments held in an ISA or pension are tax-free anyway and ‘working people’ do not have the resources to contribute to both.

ISAs – 6/10

Some years ago Ms Reeves called for a £500,000 lifetime allowance on how much can be held tax-free in ISAs.

The Resolution Foundation has suggested the figure could be even lower at £100,000.

Ms Reeves has also hinted that the annual £20,000 ceiling on contributions is too high, as only the wealthier benefit.