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Rachel Reeves signals she will break tax pledges – and gives strongest indication she will lift two-child cap
Rachel Reeves has signalled she is going to break her manifesto tax pledges at the budget – and has given her strongest indication yet she will lift the two-child benefit cap.
The chancellor said the world has changed in the year since the last budget, when she reiterated Labour’s manifesto promise not to raise national insurance, VAT or income tax on “working people”.
“It would, of course, be possible to stick with the manifesto commitments, but that would require things like deep cuts in capital spending,” she told BBC 5Live.
“I have been very clear that we are looking at both taxes and spending,” she added.
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The chancellor also gave her strongest indication yet she will lift the two-child benefit cap at the budget on 26 November, saying it is not right a child is “penalised because they are in a bigger family”.
Ms Reeves blamed poor productivity and growth over the last few years on the previous government “always taking the easy option to cut investment in rail and road projects, in energy projects and digital infrastructure”.
She said she promised during the election campaign to “bring stability back to our economy”.
Ms Reeves, here with US Secretary of Commerce Howard Lutnick in London in September, blamed tariffs for poor growth. Pic: PA
‘I’ll always do what’s right for UK’
“What I can promise now is I will always do what I think is right for our country, not the easy choice, but the thing that I think is necessary,” she added.
The chancellor blamed the UK’s lack of growth under her tenure on global conflicts, trade and tariffs over the past year.
In a dig at Donald Trump, who has imposed wide-ranging tariffs on countries around the world, she said: “The tariffs. I don’t think anyone could have foreseen when this government was elected last year that we were going to see these big increases in global tariffs and barriers to trade.
“And I have to be chancellor in the world as it is not necessarily the world as I would like it to be. But I have to respond to those challenges, and that’s the responsible thing to do.”
Read more:
What tax rises and spending cuts will Reeves announce at budget?
Gordon Brown ‘confident’ of two-child benefit cap change
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‘Shameful’ that 4.5m children in poverty
‘Children should not be penalised’
The government has, so far, resisted lifting the two-child benefit cap, which means a family can only claim child benefits for the first two children.
But, it is a contentious subject within Labour, with seven of its MPs suspended two weeks after the election for voting to scrap it, while others are aware it will cost £2.8bn to do so.
Former Labour prime minister and chancellor Gordon Brown has been pushing for Ms Reeves, who says he is her hero, to lift it.
She said she saw Mr Brown at Remembrance Sunday, where they “had a good chat and we’ve emailed each other just today”, as she revealed they speak regularly.
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Labour’s child benefit cap dilemma
Ms Reeves added Mr Brown and Sir Tony Blair were big heroes of hers because they did so much to lift children out of poverty – the reason she went into politics.
Pushed on whether she would lift the cap, she said: “I don’t think that it’s right that a child is penalised because they are in a bigger family, through no fault of their own. So we will take action on child poverty.”
Mr Brown earlier told Sky News’ Mornings with Ridge and Frost he was “confident” of a two-child benefit cap change at the budget.
The latest YouGov polling found 59% of the public are in favour of keeping the cap in place, and only 26% thought it should be abolished.
Shadow chancellor Sir Mel Stride said: “Rachel Reeves has borrowed, spent and taxed like there’s no tomorrow – and she’s coming back for more because she doesn’t have a plan or the strength to stand up to Labour’s backbenchers, who are now calling the shots.
“My message is clear: if Rachel Reeves reduces government spending – including the welfare bill, she doesn’t need to raise taxes again. “
Donations being held by Zarah Sultana will be transferred over to Your Party in tranches from this week, Sky News has been told, but the party stand-off remains.
Ms Sultana has sole control of over £800,000 of Your Party donations following an internal fallout.
Her spokesperson told Sky News £600k would be transferred over in three tranches starting with £200k from Wednesday, and the rest “once the company’s costs, expenses and liabilities are settled in full”.
But a Your Party source told Sky News she should transfer the full £800k worth of donations now.
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It follows a major row over finances behind the scenes of the new left-wing party, which Ms Sultana co-launched with Jeremy Corbyn in July.
At the time, a company called MOU Operations was used to collect donations, with the idea this would be transferred over to Your Party once it was formally registered with the Electoral Commission.
The registration happened on 30 September, but no transfer of funds has been made – despite Ms Sultana stepping in to take ownership of MOU last month after its previous three directors quit.
MOU is holding around £800k of donations in total, as well as around £500k in fees collected as part of Ms Sultana’s unauthorised membership launch, Sky News understands.
Ms Sultana’s spokesperson said £600k would be transferred over in three tranches, and the rest “once the company’s costs, expenses and liabilities are settled in full”.
The Your Party source told Sky News that Ms Sultana has been told Your Party can’t accept the money related to her membership launch due to legal risks and accused her of trying to “offload” it.
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Can Your Party get it together?
Ms Sultana agreed to take over MOU to break a standoff between Your Party and the company’s previous three directors – former Labour MP Beth Winter, former Labour mayor Jamie Driscoll and former South African politician Andrew Feinstein.
The trio set up MOU in April to assist with a new left-wing party centred around Mr Corbyn but resigned on 29 October, claiming the role of holding donations had been “thrust upon” them and raising concerns about a “lack of appropriate governance” within Your Party.
The statement said they hadn’t transferred over the funds because they were worried about legal liabilities and wanted Your Party to take over the company instead – but five of the six founding MPs refused.
Ms Sultana said her stepping in would “bring the chapter to a close” and “these resources will now be used for Your Party, as was always intended”.
However that angered some within Your Party who say this is a mess of her own making because of the membership fiasco, which is still being investigated by the Information Commissioner’s Office.
‘Low trust environment’
While Mr Corbyn and Ms Sultana have since patched things up, one Your Party source described operating in a “low trust environment”.
Senior Your Party figures have accused Ms Sultana of deliberately withholding MOU’s funds for political leverage despite privately and publicly committing to the transfer. Organisers expressed frustration at operating on a “shoestring” ahead of the founding conference at the end of this month.
However, allies close to the Coventry South MP have dismissed the “hostile briefings” and insist she has been conducting “due diligence” before sending the money over.
Sky News understands Ms Sultana has been seeking Your Party’s constitution and financial scheme as registered with the Electoral Commission, to help her understand the party’s governing structures.
A source close to her claims there has been an unwillingness to share the documents from within Your Party, so she has requested them from the elections watchdog directly.
It is not clear who wrote the documents and who is controlling access to them – or why one of the party’s founders should not be able to see them.
A spokesperson for Ms Sultana said: “Zarah did not choose to become the sole director of MOU Operations Limited, but was prepared to take on this responsibility to ensure funds are transferred as quickly as possible and preparations for the founding conference can progress.
“As sole director, she is legally responsible for ensuring the company’s costs, liabilities and expenses are settled, and this process may take some time. To ensure funds are available for the founding conference, she will transfer £600k in tranches over the next couple of weeks. The first £200k is scheduled to be sent 12 November.
“All remaining funds will be transferred once the company’s costs, expenses and liabilities are settled in full.”
A Your Party spokesperson said: “We are completely focused on putting together a successful founding conference for our members, so they can democratically decide Your Party’s structures and programme, and Britain can get the socialist alternative it so badly needs. Hundreds of volunteers are working tirelessly on a shoestring budget to make this a reality, a testament to the grassroots power of our mass movement.”
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