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• Wed Jul 2 2025

Labour won't break tax pledges after welfare climbdown, minister says

21 hours ago Share Save Joshua Nevett Political reporter Share Save

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A senior minister has insisted Labour will keep its election tax promises, after a major climbdown over welfare changes left a hole in the government's spending plans. Last night, ministers offered rebel Labour MPs last-minute concessions to pass a welfare bill that was originally intended to make ?5bn a year in benefits savings by 2030. The concessions mean the savings will now be delayed or lost entirely, which puts pressure on Chancellor Rachel Reeves ahead of the autumn Budget. Cabinet minister Pat McFadden told the BBC there would be "financial consequences" to the decision to water down planned cuts to disability and health-related benefits.

But the minister ruled out increases in income tax, National Insurance or VAT in response to the government's decisions on welfare. "I'm not going to speculate on the Budget," McFadden said. "We will keep to the tax promises that we made in our manifesto when we fought the election last year." Helen Miller, incoming director of the Institute for Fiscal Studies think tank, said the government had moved from a position of saving ?5bn to nothing by 2030. She said: "Come autumn, given the government has not been able to put through the cuts it wanted, and given that the growth might get worse rather than better, it's looking increasingly likely that, if the government needs to do something, it's going to turn to tax rises." In its election manifesto, Labour said it would not raise taxes on "working people", specifically income tax, national insurance or VAT. Reeves has committed to meeting so-called fiscal rules, which most governments in wealthy nations have in place to try to maintain credibility with financial markets. Reeves's two main rules are not to borrow to fund day-to-day public spending; and to get debt falling as a share of the UK economic output by 2029/30. But Reeves's determination to stick to these rules has led to speculation that she will raise taxes or announce spending cuts in her autumn Budget.