Kemi Badenoch warns Keir Starmer over income tax raid to fill £51bn blackhole

Kemi Badenoch has challenged Sir Keir Starmer to give his word he will not drag more people into paying income tax and National Insurance as concern mounts about a potential black hole of more than £50billion at the heart of nation’s finances. The Conservative leader has written to the Prime Minister, asking if he will commit to stick with the plan not to extend a freeze in the point at which people start paying the taxes. There is concern more pensioners and workers on low incomes will end up being taxed if thresholds are frozen.

The Leader of the Opposition says the Government should cut spending rather than increase the country’s tax burden. This follows calculations by the respected National Institute and Social Research (NIESR) that the UK will need to find £51.1billion in higher taxes and spending cuts a year by 2029-30 to tackle an expected budget deficit of £41.2billion and preserve a £9.9billion “buffer” against economic shocks.

Mrs Badenoch warns that u-turning on the plan to end the freeze on the tax thresholds in 2028 would – in the words of Chancellor Rachel Reeves – “hurt working people”.

In her letter, she tells Sir Keir: “This Labour Government has chosen to take the tax burden to a record high by failing to take action to reduce spending and tackle the unsustainable welfare budget, which is leading to ever more borrowing and a growing deficit. As a result, council tax is set to increase – despite your pre-election promise to freeze it.”

She claims the increase in employers’ National Insurance contributions has “led to unemployment increasing almost every month since you took office”, saying it “broke your pledge not to tax working people”.

The Tory leader warns changes in inheritance tax relief are “causing real pain and anguish in farming communities” while VAT on private school fees is “robbing hardworking parents of choice about their children’s future and putting additional pressure onto state schools”.

NIESR has advocated building creating a “bigger buffer” to guard against shocks through a “moderate but sustained increase in taxes”.

But Mrs Badenoch calls for a different approach, saying “tax rises are a choice but they are not the only option”.

She writes: “Cutting spending, particularly welfare spending, would ensure the cost of living crisis was not prolonged, would tackle the deficit and would be more likely to stimulate the economic growth you promised, but have taxed out of existence.”

Continuing the freeze on thresholds would, she warns, “be a direct breach of your manifesto commitment not to raise taxes on working people”.

Tom Clougherty, executive director at the Institute of Economic Affairs, agreed with Mrs Badenoch the “focus should be on spending cuts rather than tax increases”.

He said: “Public spending is already 44% of GDP. It is set to rise by about £60billion in real terms by 2029-30.

“The most sensible focus would be on keeping public spending flat in real terms over the next few years, while pursuing regulatory reforms that will increase economic growth. Ideally this would not be a rerun of 2010s ‘austerity’.

“We need a different, more radical approach – with the Government fundamentally rethinking what it does and how it does it, so that the public finances can be put on a sustainable long-term footing.”

A Labour spokesperson said: “We’ll take no lectures from this failed Tory party. They crashed the economy which sent bills and mortgages rocketing, and left a £22billion black hole. Kemi Badenoch’s next letter should be an apology to hard-pressed households for the Conservatives’ role in hammering their family finances.

“Labour is the only party focused on creating a fairer Britain. Through our plan for change we have already boosted the minimum wage for three million of the lowest paid, we’re rolling out free school meals, and we’re delivering free breakfast clubs for primary school children.

“That’s the change this Labour government is delivering after 14 years of decline.”