Rachel Reeves considering tax rises ahead of Budget as Labour faces £22billion fiscal gap

The Chancellor suggested tax reforms were on their way in her November 26 statement, as she looks to reduce the national debt while sticking to her self-imposed fiscal rules.

Ms Reeves had previously vowed to stick to the Labour's manifesto promise not to raise income tax, national insurance or VAT.

But reports last week suggested Ms Reeves was considering an income tax hike, with the Institute for Fiscal Studies estimating she needed to plug a £22 billion hole using tax rises or spending cuts.

Some economists have estimated this figure could be as high as £50billion.

Despite this, Ms Reeves stressed that her promises still "stand", adding that she would “continue to support working people by keeping their taxes as low as possible”.

She also hinted at higher taxes on the wealthy, insisting that “there is another way to improve the fiscal position: growing the economy”.

Ms Reeves made the suggestions while in Riyadh, where she is “confident” a trade deal with the Gulf Co-operation Council (GCC) could be finalised.

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Speaking from Saudi Arabia on Monday, she did not rule out the possibility of tax rises, stressing that she was still “going through the process” of writing the Budget.

"The underpinning for economic growth is stability, and I’m not going to break the fiscal rules that we’ve set,” the Chancellor said.

She added: "We are going to reduce that primary deficit, we are going to see debt starting to fall as a share of GDP, because we need more sustainable public finances, especially in the uncertain world in which we live today.

"So growth will be a big part of that Budget story, in a way that, frankly, I think growth has been neglected as a tool of fiscal policy in the last few years.

"But we are looking, of course, at tax and spending to ensure that we both have resilience against future shocks by ensuring we’ve got sufficient headroom, and also just ensuring that those fiscal rules are adhered to."

The Treasury hopes a trade deal with the GCC could add £1.6 billion to the UK economy and contribute an additional £600 million to UK workers’ annual wages in the long term.

The GCC represents Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

Ms Reeves acknowledged she arrived "a little bit late" for her event at the Fortune conference, telling the audience it was a result of “really good meetings” about the deal.

She said she hoped conference attendees “will agree that’s worth it, if we can get that GCC deal over the line”, and later added: “And yes, I am confident that we can get that deal over the line.”

The Chancellor also defended the Government’s approach to axing the very wealthy, when asked about why some were leaving the UK for other countries.

"Everybody knows that countries around the world are having to spend more on defence that we need to rebuild our public finances and our public services, and everyone who makes Britain their home should contribute to that,” the Chancellor said.

She added: “We don’t want to drive anyone out of the UK, but we do want to make sure that we tax people fairly, people who make Britain their home, whichever country they or their parents are originally from.”