Susanna Siddell
Guest Reporter
Rachel Reeves is set to launch the largest Budget tax raid in history in her upcoming October Budget.
The Chancellor has reportedly faced backlash from her fellow Cabinet ministers, including the Deputy Prime Minister, as her first Budget is expected to include £35billion worth of tax rises - the highest ever in history - as she commits to ending austerity.
It has been suggested that proposals set out in the Budget on October 30 will involve the first increase in fuel duty since George Osborne's freeze during the coalition Government, as the Treasury aims to fill a '£40billion financial hole' in the public finances.
Speculation has also surrounded rises in capital gains tax in addition to employers' National Insurance contributions.
The money raised will be directed to support costs associated with asylum seekers, as well as public services, including the NHS and workers' pay increases.
Sources across Whitehall have claimed that more than 90 per cent of this money would be raised through higher taxes, rather than spending cuts.
The Office of Budget Responsibility was set to receive the Chancellor's main proposals last night.
One Whitehall official told The Telegraph: “You can’t solve a spending problem with spending cuts.”
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Another said: “We face the problem of paying for the spending pressure that we have inherited (the £22billion), paying for the spending pressure on departments, and paying for manifesto commitments.
“If you’re trying to avoid implied spending cuts, you can’t do that by making spending cuts. That leaves tax rises.”
Reeves' tax raid is estimated to exceed former Conservative Prime Minister and Chancellor Rishi Sunak's 2021 Budget. The Tory leader increased corporation tax by six per cent to plug the hole left by the pandemic.
Ahead of October 30, the Labour Chancellor has announced one benefit cut: ending the winter fuel payments, which is estimated to raise £1.4billion.
Meanwhile, welfare support is expected to survive Reeves' Budget unharmed, as official forecasts indicate that state spending on health and disability benefits will increase to £63billion between 2028-9.
According to the Financial Times, one Whitehall source said: “Ministers and departments feel that what they are being given is very miserable. They are worried about what it means for Government ambitions and commitments.
“But of course they can’t see the overall picture — quite how difficult the inheritance really is and the scale of the pressures on tax and borrowing. But it’s very, very difficult for all of them.”
Another said: “We are still in the middle of negotiations. It’s not surprising that it’s going to be a challenging spending review.
“We are all trying to work together to make the choices as less challenging as possible.”
Since some budgets are “protected” (such as the NHS and defence), areas such as policing, prisons and transport might face cuts as a consequence.
Cabinet ministers have reportedly written to their leader Keir Starmer to express their concerns.
A Downing Street spokesman explained that this type of communication between departments and the Prime Minister is a standard part of the process.
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