The Prime Minister had previously braced Brits for a “painful” Budget on 30 October, and since then, rumours have swirled about the level of tax hikes on the horizon.
This speech was the clearest indication yet that a range of tax rises are on their way.
He echoed the Labour manifesto pledge to the audience of his Fixing the Foundations speech in Birmingham that those with the “broadest shoulders” would carry a higher burden of tax.
Starmer said: “It’s time to embrace the harsh light of fiscal reality, so we can come together behind a credible, long-term plan. It’s time we ran towards the tough decisions, because ignoring them set us on the path of decline.
“And frankly, when we’re asking broader shoulders to carry a higher burden on tax, that determination to be more productive and efficient in Government, that’s the very least their contribution deserves.”
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There has been speculation about a whole host of tax increases ahead of the announcement on 30 October, when Chancellor Rachel Reeves will share the details of the Government’s financial plan for the UK.
This has escalated since the newly appointed Prime Minister said there was a £22bn black hole in public finances left for the Labour Party to plug following 14 years of Conservative rule.
The PM has repeatedly said that there will be no tax rises for ‘working people’, meaning no rises on income tax, National Insurance contributions (NICs) (for employees) or VAT.
However, this leaves a limited pool of ways to boost the public purse, so there is a widespread belief there will be rises in capital gains tax (CGT) and inheritance tax and a drop in the tax-free limit on lump-sum pension withdrawals from £268,275 to £100,000.
The comments have also led to the PM being asked what defines a ‘working person’ and he didn’t consider anyone who owns shares or rental property as such.
Starmer added: “Look – nobody wants higher taxes, just like nobody wants public spending cuts. But 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. We have to deal with both sides of that coin.”
With just two days left until the Autumn Statement, there are concerns among investors about what changes will arrive from within the red box.
‘Potentially seismic tax changes’
Following the speech, Toby Tallon, tax partner at wealth management firm Evelyn Partners, said: “Business owners in particular are worried about what the Budget may bring, given the likelihood of potentially seismic tax changes being planned by the Chancellor that could affect their firms and their financial security.
“Many fear that their hard work ploughing time, energy and money into their businesses – often over many years – will earn rapidly diminishing rewards.
“Small and medium-sized enterprises are already having to make difficult decisions around staffing, and owners have become more nervous about starting, growing and the prospect of selling businesses. Those difficulties look set to become more grave, and potentially problematic for economic growth, after Wednesday’s Budget.”
