29th Sep 2025 11:13
(Alliance News) - Rachel Reeves hinted at tax rises in the Budget but insisted Labour's manifesto commitment "stands" on VAT rules as she unveiled plans to guarantee work for long-term unemployed youth.
The UK chancellor said the "world has changed" since last year when she told business chiefs the government would not be coming back for "more taxes" after raising around GBP40 billion in November.
Speaking to broadcasters from Labour's annual conference, Reeves warned the UK was not "immune" to increased global borrowing and tougher trade barriers stemming from US tariffs.
She acknowledged there was "more to do" but said she was "proud" of the government's economic record a year into office, pointing to its most recent pledge to guarantee work for long-term unemployed young people.
During the media round, the chancellor:
– Said she was "determined not to increase those key taxes that working people pay" and said "the manifesto stands" when asked to rule out a hike in VAT in the Budget. Labour's election document promised not to increase the tax.
– Promised to stamp out the "scourge" of long-term unemployment among young people with a plan to guarantee jobs for those out of work and receiving universal credit for 18 months. She warned claimants would face losing their benefits if they refused the offer.
– Echoed Keir Starmer's criticism of Reform UK's immigration policy as "racist," but said "you can support the Reform party and not be racist".
– Insisted the government "will reduce child poverty, but we've also got to make sure the numbers add up" in a sign the two-child benefit cap could be lifted.
– Said she was "genuinely loving this job" while acknowledging there had been "difficult days – some of them very public" as chancellor.
Reeves is preparing to deliver a potentially difficult Budget on November 26, which economists have warned will require significant tax rises or spending cuts as she battles to meet her self-imposed borrowing rules.
Speaking to BBC Radio 4's Today programme, she declined to repeat her promise to the Confederation of British Industry last year that the government will not be coming back with "more borrowing or more taxes".
"I think everyone can see in the last year that the world has changed, and we're not immune to that change," she said.
"Whether it is wars in Europe and the Middle East, whether it is increased barriers to trade because of tariffs coming from the US, whether it is the global cost of borrowing, we're not immune to any of those things.
"It's very important that we maintain those commitments to economic stability because we rely on people to buy government debt to be able to finance the things that we're doing as a country. I wish it wasn't so, but I am chancellor in the world as it is, not the world that I might wish it to be."
Asked directly about the prospect of abolishing the two-child limit on benefits, she said: "That's a decision for the Budget. No one needs to tell me about child poverty – I came into this party because I desperately care about children and their life chances.
"It's why we've done free school meals, it's why we've done breakfast clubs, it's why we've increased the national living wage and the national minimum wage, so I'm that chancellor that cares about child poverty.
"We will reduce child poverty, but we've also got to make sure the numbers add up, and people can trust me to ensure that that always happens."
Elsewhere, Reeves repeatedly declined to rule out raising VAT – a levy which Labour committed in its manifesto not to hike – but said the commitments in its policy document "stand".
Ministers have previously explicitly promised not to raise the tax, and the shift in language – first used by the prime minister on Sunday – has prompted speculation that a change could be made in the Budget.
"I'm determined to make working people better off and why I'm determined not to increase those key taxes that working people pay, and that's why we made those commitments in the manifesto, and that's why we stand by them," she told ITV's Good Morning Britain.
Asked to rule out an increase to VAT, she said: "The manifesto stands, and it stands for a reason."
Reflecting on her first year as Chancellor, Reeves acknowledged there had been "difficult days – some of them have been very public" after her tearful Commons appearance earlier this year sparked questions about her future in the role.
But she added: "Has it been easy? No. I didn't go into this thinking it was going to be easy."
"I'm really proud of what we've done. I'm the first to admit there's more to do," she told BBC Breakfast.
"We're 15 months into this government and as the first Labour chancellor in 14 years and the first female chancellor in 800 years, I am genuinely loving this job and the chance to serve, because that's what I came into this for – just the chance to serve and make our country a bit better off."
Tory leader Kemi Badenoch seized on the remarks, saying: "Yesterday Keir Starmer refused to rule out a VAT hike. Today the chancellor refuses to rule out new tax rises.
"Nobody should be in doubt: the Labour government is about to raise your taxes. Only the Conservatives are committed to living within our means so we can lower tax."
Meanwhile, the chancellor repeated Starmer's assertion that Reform UK's immigration policy, which would review the right of some migrants working legally in the UK to remain, was "racist."
But she said "you can support the Reform party and not be racist", adding she was "not sure many people" back the insurgent right-wing party's plans.
"I think there are lots of people who back Reform who will be horrified by the thought that people who have come to this country legally, who are working and contributing, will be deported from this country," she told LBC.
Reform's head of policy Zia Yusuf accused Starmer of considering the Britons who believe in the immigration policy of being "racist" and said this shows "this is a prime minister circling the drain."
Reeves will use her speech to the party conference in Liverpool to make the case for a society founded on "contribution" as she unveils plans for a "youth guarantee" aimed at driving down unemployment.
The scheme will see young people on universal credit for 18 months guaranteed the offer of work, with those who refuse to take up jobs without a reasonable excuse potentially stripped of their benefits.
By Nina Lloyd and Harry Taylor
Press Association: News
source: PA
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