Rachel Reeves: 'You’re not going to write my obituary today'

Having abandoned plans for a manifesto-busting income tax rise, Ms Reeves opted for a range of smaller tax increases to pay for Government spending and build a larger buffer against her borrowing rules.

These include a new pay-per-mile tax for electric vehicles, increased taxes on online betting and a so-called “mansion tax” on homes worth more than £2m.

But she continued to face accusations of breaching Labour’s election promise not to raise taxes on working people after deciding to keep the Conservative policy of freezing tax thresholds from 2028 to 2031.

The freeze in thresholds will result in 780,000 more basic-rate, 920,000 more higher-rate, and 4,000 more additional-rate income tax payers in 2029/30 as earnings rise over time.

Ms Reeves insisted the threshold freeze did not breach Labour’s manifesto commitment not to increase income tax or national insurance.

And she said the burden on working people – the group Labour had promised to protect – was being kept to a minimum.

She told Sky News: “I do recognise that that will mean that working people pay a bit more. But I’ve kept that contribution to an absolute minimum by closing … a number of tax loopholes and also bearing down on Government spending, on waste and inefficiency.”

The Resolution Foundation argued that Ms Reeves’s decision to stick to her “manifesto tax pledge has cost millions of low-to-middle earners, who would have been better off with their tax rates rising than their thresholds being frozen”.

The think tank said in its initial response that raising all rates by 1p would have been less costly than freezing thresholds for anyone with an income below £35,000.

“Indeed, all but the top 10% of the income distribution are worse off because of opting for threshold freezes over rate rises (which raise similar amounts of revenue),” it said.

Chief executive Ruth Curtice said most of the Budget's impact would be felt in three years.

“Those threshold freezes kick in in 2028. Some of the other measures also not coming in – for example the mansion tax and the salary sacrifice – until 2028, so that’s when most of the pain from this Budget will be felt,” she told the BBC.

“This Parliament is set to be second only to the last parliament for (living) standards… This decade continues to look really, really tough.”

Ms Reeves denied that she was hiking workers’ taxes in order to put money towards the soaring welfare bill. She told Times Radio: “I don’t accept that.

“The OBR say that their revisions to productivity, reflecting the Conservatives’ legacy, is going to mean £16bn less tax revenue, and as a result, we have to fill that gap. But if we can grow the economy, as I’m determined to do, we can get that money back.”

She told the presenter challenging her over rising welfare costs that “lots of people have tried to write me off over the last 16 months, and you’re not going to write my obituary today”.

The Leeds West and Pudsey MP refused to “apologise” for axing the two-child limit for universal credit – a measure to ease child poverty warmly welcomed by Labour MPs but costing £3bn a year by 2029/30.

This is set to help around 100,000 families across Yorkshire and the Humber.

Ms Reeves described it as a “good investment” that would reduce future costs by giving children from low-income households a better start to life, and said 60 per cent of the families that would gain from the abolition had parents in work.

“When I became Chancellor, in my very first speech, I said that I would know my time as Chancellor has been a success if there are ordinary kids from working class backgrounds living more fulfilling lives,” she said.

“I believe I achieved that in my Budget yesterday. It’s a Budget that I’m incredibly proud of, and I look forward to delivering many more budgets to help grow our economy and put more money in working people’s pockets.”

Ms Reeves was backed by Sir Keir Starmer yesterday in his first public comments on the Budget.

“It’s impossible to argue that this is a position that has been adopted just in the last few weeks. It is my long-standing ambition,” the Prime Minister said of scrapping the two-child cap.

“I’m proud to be the Prime Minister who has done more on child poverty than any prime minister ever.”

He also pointed to the “massive impact” the “abhorrent” Tory policy had had on the health of hundreds of thousands of children.

“I’m not going to apologise for lifting half a million children out of poverty,” Sir Keir said.