Rachel Reeves will 'rob Peter to pay Paul' as tax rises for millions loom large

Rachel Reeves is plotting to rob "Peter to pay Paul" after losing control of Government spending and the benefits bill, Sir Mel Stride has warned.

The Chancellor is set to hike income tax by 2p as part of measures to fill a huge financial blackhole.

But Sir Mel told the Daily Express Ms Reeves is "robbing Peter to pay Paul" amid claims she could cut national insurance by 2p as part of a "two up, two down" strategy.

Labour insiders hope the change will persuade voters the Chancellor is protecting "working people" because the vast majority of pensioners do not pay national insurance.

But Mr Stride told the Express: "Let me be clear: if Rachel Reeves got a grip of government spending - including the spiralling welfare bill - she wouldn't need to break her promise and raise taxes again.

"If reports are to be believed, Rachel Reeves is toying with an income tax rise while cutting National Insurance - that's just robbing Peter to pay Paul.

"A future Conservative government would focus on controlling spending, not squeezing working people and businesses.

"At our conference, I set out £47 billion in savings - including £23 billion from welfare reform - precisely to avoid tax rises like these.

"It comes down to choices and Rachel Reeves is making all the wrong choices. Britain can't afford another broken promise from Labour."

On Friday, the Chancellor told the Office for Budget Responsibility (OBR) that she planned to raise income tax in the Budget.

This could raise around £11bn, according to the Resolution Foundation.

The NI cut would apply only to those earning less than £50,270 - meaning a significant tax rise for millions of middle earners.

This includes 283,000 NHS staff, 137,000 teachers as well as police officers, pharmacists and train drivers.

One ally of the Chancellor told The Observer: "It's not pitting one generation against the other but [Reeves] does feel that the previous government had an institutional bias towards the older generation at the expense of the younger."

And Labour MPs are said to be increasingly frustrated with the Chancellor.

One backbench Labour MP said: "Rachel Reeves is running out of road, frankly. It feels like the Budget will be a dam burst. Look at where we are in the polls. [Sir Keir] Starmer isn't going to turn that around, Rachel isn't going to turn that around. It is really hard to see Rachel and Keir surviving this Budget. It feels to me they will be lucky to be here by Christmas."

Graham Stringer, one of Labour's longest-serving MPs, said: "I personally can't see how any Chancellor can stay on if they break a pledge that was fundamental to the Labour party's commitment to the public.

"I think there is a feeling of despair that the manifesto painted us into a corner that we should never have been painted into. But having made the commitment we have to stand by it. I just think the credibility of any Chancellor who breaks such a fundamental pledge will disappear."

Labour promised during the general election not to raise income tax, VAT or national insurance.

A senior Cabinet minister on Sunday insisted that "promises matter", adding she agreed with Deputy Leader Lucy Powell, who said "we should be following through on our manifesto".

Asked whether she agreed with Ms Powell, the former Commons Leader, Ms Nandy told Sky News's Sunday Morning With Trevor Phillips programme: "Look, we take our promises very, very seriously and we did make specific commitments around tax in the manifesto.

"But we were also elected on a promise to change this country, and through the record investment that we've been able to put into the National Health Service, we're seeing waiting times coming down and more appointments being made available on a whole range of measures.

"We're delivering the change that people want to see. We are going to have to make difficult decisions. I'm not going to write the Budget live on air."

Earlier this week, Ms Powell suggested breaking the pledge not to raise income tax, national insurance or VAT would damage "trust in politics".

The former Commons leader told BBC Radio 5 Live: "We should be following through on our manifesto, of course. There's no question about that."

She continued: "Trust in politics is a key part of that because if we're to take the country with us then they've got to trust us and that's really important too."

Speaking on Sunday, Ms Nandy said: "I agree with Lucy Powell that promises matter.

"I also agree with her that the situation that this Government inherited is very challenging.

"We've got to make fair choices, and like she said in answer to a question about this, she will of course always support the Chancellor to make the right decisions in the interest of the country."