Labour MPs fret that Rachel Reeves's tax hikes will lead to humiliating election defeat

Labour MPs fear Chancellor Rachel Reeves’s tax-raising Budget could kill off the party’s chances of winning a second election victory.

The Chancellor was last night dubbed “Rachel Thieves” as she prepared to announce tax rises and spending cuts amounting to £40 billion, with voters facing higher bills for income tax and inheritance tax while firms are to pay more National Insurance.

But Liam Byrne, Chief Secretary to the Treasury in the last Labour government and now chairman of the House of Commons Business Committee, urged her to cut taxes instead.

He said: “Chancellor Rachel Reeves needs to use her Budget to restore fair play to the tax system and put up taxes on the super-wealthy so we can cut inheritance tax for ordinary working people.”

Former environment minister Barry Gardiner warned getting the Budget wrong could end Sir Keir Starmer’s hopes of winning a second term in Number 10.

The Labour MP told the Sunday Express: “If Rachel Reeves’s Budget on October 30 is not bold and transformative then Labour will be leaving office again at the next election.”

Mr Gardiner called for a “Budget of national renewal” with borrowing to pay for infrastructure, and said the gloomy rhetoric being used to justify tax rises should be replaced by “hope and ambition”.

Their fears are echoed privately by other Labour MPs. One said: “It’s not about bad messaging, the problem is that we won power without knowing what we planned to do with it.”

Downing Street will attempt to present the Budget in an upbeat manner by releasing a report showing how the Chancellor’s decisions will help the Government achieve its key “missions”, including giving the UK the highest sustained growth in the G7.

But Tories accused Labour of breaking manifesto promises not to increase National Insurance or Income Tax.

Shadow Home Office Minister Matt Vickers said: “Dragging more people into tax and taking away the fuel allowance of millions of pensioners? Our new labour chancellor could well earn the name ‘Rachel Thieves’.”

And Nigel Huddleston, the Shadow Financial Secretary to the Treasury, claimed Labour had “tried to pull the wool over the public’s eyes”.

He said: “We stand on the verge of a fiscal event that will be a disaster for our country, and for the economy.”

The Chancellor is considering increasing National Insurance contributions from employers, a move Labour insists would not break a manifesto promise stating: “Labour will not increase taxes on working people, which is why we will not increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT.”

Ms Reeves is also set to announce she is extending a freeze on income tax thresholds, which was due to end in 2028, dragging up to 600,000 people into the higher 40% rate and increasing income tax in real terms for basic-rate payers.

The Chancellor faces a cabinet revolt over potential cuts to spending. Justice Secretary Shabana Mahmood, Transport Secretary Louise Haigh and Deputy Prime Minister Angela Rayner, the Housing Secretary, have written to the Prime Minister demanding a rethink.