Sir Keir Starmer refuses to rule out Autumn tax hike amid think tank warning

Sir Keir Starmer has refused to to rule out an Autumn tax hike as the Institute for Fiscal Studies (IFS) warned they were “likely” following the Spring Statement.

The Prime Minister told reporters he would not “write future budgets” ahead of time but that the measures in Rachel Reeves’ financial update reflected a resistance to imposing further tax hikes in order to balance the books.

He also insisted changes announced by the Chancellor would help to boost living standards and make people better off despite analysis suggesting 250,000 could be pushed into poverty as a result of welfare cuts.

It comes as the IFS, an economics-focused think tank, claimed the Chancellor had left herself open to six months of “damaging speculation and uncertainty over tax policy”.

While the Chancellor restored her £9.9 billion headroom of spending power with cuts made at the statement, the IFS warned the buffer is small by historic standards.

At a press conference in Paris on Thursday, Sir Keir was asked whether pensioners and the wealthy would be targeted in tax rises at the budget in the event that economic forecasts deteriorate further.

“Obviously I’m not going to write future budgets, every prime minister and every chancellor from every government always takes that position,” he said.

“But if you look at the pattern, if you like, or the intent from both the budget and the spring statement, you’ll see that when it’s come to the decisions we’ve had to make, we have not taken the decision to increase tax.

“And I think that indicates the mindset that we bring to this.”

The overall tax burden in the UK is forecast to rise from the equivalent of 35.3 per cent of GDP in 2024/25 to 37.7 per cent in 2027/28, the highest level since current records began in 1948.

The Chancellor has also denied there will be further tax rises or spending cuts at the autumn budget in order to balance the books, but stopped short of ruling them out entirely.

Sir Keir said the Government had “kept good” to Labour’s manifesto promises of not increasing income tax, VAT and national insurance for working people.

This claim is disputed by political opponents, who argue that the hike to employer – rather than employee – national insurance announced in last year’s budget amounts to a tax on jobs that will thwart economic growth.

Separate figures published on Thursday showed a new record high number of children living in poverty in the UK.

Data published by the Department for Work and Pensions showed 4.45 million children were estimated to be in households in relative low income, after housing costs, in the year to March 2024 – up from 4.33 million the previous year and the highest figure since comparable records for the UK began in 2002/03.

The total number of people in the UK estimated to be living in poverty was down slightly, to 14.25 million in 2023/24 from 14.32 million in the previous 12 months.

IFS director Paul Johnson has now suggested future tax rises are “likely” due to Ms Reeves adherence to her self-imposed fiscal rules.

He said: “We don’t know how sacrosanct those promises are.

“It might be politically very unpopular if she needs to raise really significant amounts – £20bn plus. She’s going to struggle to get a lot from elsewhere.

“There is a good chance that economic and fiscal forecasts will deteriorate significantly between now and an autumn budget. If so, she will need to come back for more; which will likely mean raising taxes even further.

“That risks months of speculation over what those tax rises might be – a raid on pensions, a wealth tax on the richest, another hike to capital gains tax? I mention those not to commend them, far from it, but to exemplify the kinds of taxes regarding which mere speculation about increases can cause economic harm. With no sense of a tax strategy, we have no idea which way the chancellor might turn.”

Mr Johnson also suggested Ms Reeves’ commitment on ensuring she had exactly the same fiscal headroom as she did in the autumn budget was getting in the way of policy making.

Chancellor Rachel Reeves leaves 11 Downing Street to deliver her spring statement to Parliament on March 26, 2025 | Getty Images

He said: “We had £9.9bn of headroom in October. We have £9.9bn of headroom today. Astonishingly the numbers are within a mere £2m of one another. It is hard to believe this is a fluke. The Treasury has clearly worked overtime to ensure that precisely the same fiscal headroom remains today as was projected in October. This is not sensible.”

Mr Johnson also said having little fiscal headroom, and then applying the fiscal rules rigidly, was “not conducive to a sensible policymaking process”.

He continued: “It is the combination of ‘iron-clad’ pass/fail numerical fiscal rules and next to no headroom against them that is causing so many problems, leaving fiscal policy completely exposed to economic developments outside the government’s control. That is not conducive to a sensible policymaking process. This is not the OBR’s fault. It is the product of the chancellor’s choices.”

It comes as the Chancellor insisted she is “absolutely certain” her welfare reforms will not push people into poverty, and denied there will be further tax rises or spending cuts at the autumn budget.

An impact assessment of sweeping reforms to the benefits system was published alongside Ms Reeves’ spring statement on Wednesday, and warned some 250,000 people – including 50,000 children – could fall into relative poverty as a result of the changes.

The Chancellor told Sky News: “I am absolutely certain that our reforms, instead of pushing people into poverty, are going to get people into work.

“And we know that if you move from welfare into work, you are much less likely to be in poverty.

“That is our ambition, making people better off, not making people worse off, and also the welfare state will always be there for people who genuinely need it.”