Reeves reserves right to ‘take action’ on taxes ‘at any point’

Rachel Reeves has said she reserves the right to take action “at any point” to bolster the public finances, but has signalled she is unlikely to do so in next year’s Spring Statement.

Appearing at the House of Commons Treasury select committee, the UK chancellor was quizzed on her two tax-raising Budgets and whether she would have to raise more revenue by the end of the parliament.

In response, Reeves highlighted her moves to freeze income tax thresholds for longer and increase the government’s “headroom” — its room for fiscal manoeuvre — from £10bn to £22bn.

“I reserve the right to be able to take action at any point but I believe the headroom we have and changes we have made means I won’t need to do that in the spring,” she said.

Under changes introduced by the chancellor, the Office for Budget Responsibility now only judges whether the government is on track to meet its fiscal rules once a year, alongside the autumn Budget.

The OBR will still present a set of forecasts in the spring, and these will make it clear if there has been any deterioration in the fiscal outlook.

Reeves also angrily denied suggestions from Conservative Harriett Baldwin that last month’s package, which took taxation to new highs, failed to include any pro-growth measures.

Appearing alongside senior civil servants, the chancellor expressed her frustration at pre-Budget leaks, including the Financial Times’ report that she had abandoned plans to raise income tax rates.

James Bowler, Treasury permanent secretary, added that the FT story of November 13 was the “main focus” of his Budget leak inquiry.

The Budget included a heavily backloaded set of tax rises, as well as spending restraint intended to come into effect at the end of the parliament. 

Despite the pressure on the public finances, the chancellor ruled out replacing the pensions triple lock with a “single lock” for the rest of the parliament.

Markets remained steady as the chancellor spoke.