Reeves won’t rule out more tax rises in 2026 despite £66bn Budget hikes

The Chancellor Rachel Reeves has said she cannot rule out further tax rises following her controversial Budget last month, in an interview with The i Paper.

The Chancellor was accused of breaching Labour’s manifesto pledge not to increase taxes on working people when she froze income tax thresholds and announced a national insurance (NI) raid on pension contributions.

The UK’s tax burden is now at its highest since the Second World War, after Reeves increased taxes by £26bn last month, following a £40bn rise in her first Budget.

She came under intense scrutiny for last month’s tax rises, having previously claimed that she would not be “coming back with… more taxes”.

However, speaking to The i Paper about plans to loosen mortgage borrowing rules, Reeves said she could not rule out future tax hikes.

The Chancellor said she hopes “further changes to taxes are less necessary” due to the £22bn of fiscal headroom left after the Budget, but she would not commit to no further tax increases.

She said: “The Budget was just a couple of weeks ago, and I made my decisions in that budget. It would be wrong to start writing future budgets just a couple of weeks after the last Budget.

“What I did do in the Budget a couple of weeks ago was increase the fiscal headroom that the Government has, more than doubled that, which means that when further disruption and shocks come our way… we’re better able to withstand those sorts of shocks, which will hopefully mean further changes to taxes are less necessary.”

She added: “The world is incredibly volatile at the moment. The best thing we can do to help people get on the housing ladder is to ensure that interest rates stay low, [and] continue to come down, so that more young people [and] families can get on the housing ladder.”

Reeves and Sir Keir Starmer faced claims they had breached Labour’s manifesto pledge not to increase income tax, NI or VAT, with the Institute for Fiscal Studies (IFS) warning the Budget will lead to “truly dismal” living standards for workers.

The Chancellor’s biggest move was to freeze tax thresholds for another three years until 2031. This will mean an extra 1.8 million people will pay more tax, or pay tax for the first time, as wage increases drag them into static tax bands.

Exclusive polling by BMG Research for The i Paper found that Reeves’s Budget was the most unpopular since Liz Truss’s disastrous “mini-Budget” – only 22 per cent said they felt positive about it, with 51 per cent feeling negative.

Although most of the individual measures had support, most voters believe the overall package left them worse off.

The Chancellor said tax rises were needed to increase the buffer she has against future economic shocks, known as headroom, without returning to austerity or relying on “reckless borrowing”.

Reeves told The i Paper she sees unlocking home ownership for first-time buyers as a key factor in securing the economic growth needed to boost both the Treasury’s financial headroom and Britain’s economy.

The Chancellor said: “There has been a decline in home ownership over the last 10 or 15 years and I want to move in the other direction and find more people being able to get a mortgage and get on the housing ladder, because I know that that is the aspiration for so many people.”

Plans being considered by the financial services watchdog, the Financial Conduct Authority (FCA), to allow people to access bigger mortgages have raised concerns about the levels of debt being taken on by first-time buyers.

However, Reeves said she is adamant the approach is “the right one”, saying “building more homes, combined with the greater flexibility with the regulator’s [mortgage] rules about what banks and building societies can lend,” will give first-time buyers opportunities which have been closed off to them in recent years.

She added: “Housebuilding is really important, and that’s why we’re ripping up and reforming all the planning rules. And, second, [we are] making housing more affordable, and the best way to do that is to bring interest rates down by returning stability to the economy.”