Labour's humiliating climbdown after dire warning it would clobber voters with tax rises

Chancellor Jeremy Hunt warned Labour cannot be trusted with the economy after it was bounced into a late-night promise that it will not increase VAT.

Sir Keir Starmer’s party has repeatedly refused to rule out a hike in the shopping tax since the general election was called.

But Tories warnings last night that the Labour leader was planning to fill the £38 billion black hole in his spending plans with a rise in the levy forced a hastily written pledge from the party.

Mr Hunt told the Daily Express: "Having spent all week refusing to rule out an increase in VAT to fill the £38 billion black hole in their spending promises, Labour have buckled today under pressure.

“As with the flip-flopping on £28 billion it demonstrates that they don’t have a plan for the economy.

“Labour does however have lots of additional spending which can only mean one thing - higher taxes, worth £2,094 for the average family."

It took Labour less than two hours to make the major tax pledge after the Conservative party put them on the spot.

Tories said that Labour cannot claim to be the party of stability when it writes tax policy on the hoof.

Treasury costings show Labour is facing a gaping £38.5 billion black hole in its spending plans.

The party insists the chasm will be filled by economic growth, despite leading economists insisting that will not make the sums add up.

Mr Hunt today (THURS) makes an explicit promise to voters that VAT, income tax and national insurance will not rise under the Conservatives.

He said: “We are ruling out raising the main rates of income tax and VAT – and we’re going to keep cutting national insurance as and when we can afford to do so over the long term.

“That’s how we will give families a more financially secure future in an uncertain world.”

Most goods and services are charged at the standard rate of 20% Value Added Tax.

The Tories believed Labour was planning a VAT bombshell after analysing the interviews given by Sir Keir and Rachel Reeves since the election was called.

Although the Labour leader and shadow chancellor had ruled out raising income tax or national insurance, they studiously avoided questions about VAT.

They used the same formulation of words that rules out raising income tax and national insurance for the next parliament while sidestepping the VAT questions.

The tax burden has hit a post-war high under the Conservatives after the country was rocked by the covid pandemic, the fallout of the invasion of Ukraine and global instability putting pressure on the supply of goods.

But Mr Hunt has used his last two financial statements to cut national insurance by a total of 4p in the pound.

He wants to eventually abolish the tax on work but the aspiration would take more than five years.

And the Chancellor has laid out plans for the “triple lock plus” to stop the poorest pensioners from being dragged into paying income tax.

Tory analysis of Treasury figures shows Labour plans to spend £38.5 billion more than its so-far announced tax increases would raise.

It works out to around £2,094 for every working household. Raising the main rate of VAT by one percentage point would fill most of Labour’s black hole at a stroke – but only by putting up prices on working families.

Mr Hunt’s dossier exposing Labour’s spending plans released shortly before the election was announced was based on the most cautious figures, Conservatives insist.

The document claims Labour’s spending promises will cost £59 billion over the next four years.

In contrast, their plans to raise revenue would only collect £20 billion over the same period, leaving a £10 billion annual blackhole.

Mr Hunt said that means Sir Keir will have to raise taxes equivalent to £2,094 per working household through income tax, national insurance, VAT or other taxes.

Labour launched its own attack on Conservative spending plans, with shadow Treasury minister Darren Jones claiming the Tories need to find £71 billion.

He insisted Labour is being “very honest with the public” at a press conference in London.

A Conservative Party spokesperson described Labour’s document on their spending plans as “shoddy”.

A Conservative Party spokesperson described Labour’s document on their spending plans as “shoddy”.

Mr Jones said: “Rachel Reeves, the shadow chancellor, was very clear yesterday, that all of our policies are fully funded and fully costed.

“The way we raise the money to pay for those policies – those first six steps that an incoming Labour government will implement – is through the closure to the loopholes that we have set out, so private school VAT, private equity bonus tax, closing the non-dom loopholes, the energy profits levy on windfall in the oil and gas industry, and investing to tackle tax avoidance in the system.”

“None of our policies requires any further funding and that’s why there is a commitment to not raising taxes in the manifesto in this election.”