Reeves hints at business rates reforms but declines to rule out fuel duty hike

Chancellor Rachel Reeves has hinted at a reform to business rates in Wednesday’s Budget, but declined to rule out a fuel duty hike.

Ms Reeves took questions from MPs in the House of Commons on Tuesday, where she vowed “no working people will have higher taxes” after she unveils Labour’s first Budget since 2010.

She also faced calls to reverse a cut to the winter fuel payment from the Conservative and Liberal Democrat front benches, and to increase defence spending to 2.5% of GDP.

Asked by Liberal Democrat deputy leader Daisy Cooper about business rates, Ms Reeves committed to a “five-year roadmap” for business rates, the fees which councils collect from companies to support local services.

The Chancellor told MPs: “Small businesses and high street businesses are the lifeblood of all of our communities, including hers in St Albans, and it is important that we support them.

“In our manifesto, we committed to have reform of our business rate system.

“I’ll be setting out more details in the Budget tomorrow, as well as a business tax roadmap, because a business tax roadmap is what will give businesses certainty about the tax environment that they will be working with for the next five years.”

Ms Cooper had urged the Chancellor to make Wednesday’s announcement “the final Budget where business rates are a permanent feature”.

Conservative shadow innovation minister Saqib Bhatti told the Commons: “Small business owners are working people and they are some of the hardest-working people that I know.”

Mr Bhatti suggested “any rise in fuel duty, which the Conservatives froze or cut for 14 years, would be a tax on those hardworking people or those hardworking small business owners”.

The Chancellor replied: “The previous government factored into their forecast an increase in fuel duty this year. I will set out our plans in the Budget tomorrow.”

The fuel duty cut – of 5p per litre on diesel and unleaded fuels – was due to end in March 2025, according to the previous government’s spending plans.

On the winter fuel payment, Conservative shadow minister Dame Harriett Baldwin said: “The living standards of a 90-year-old pensioner on a £13,500 income are falling sharply this winter, as a result of her decision to take away the winter fuel allowance.”

She urged the Chancellor to “increase that threshold” so more pensioners are entitled to a payment of up to £300 this year, available only to claimants of some benefits, including pension credit and universal credit. Ms Cooper also urged the Government to reconsider the threshold for winter fuel payment claims, adding Ms Reeves should “think again”.

The Chancellor said: “(Dame Harriet) will know that because of our commitment to the triple lock that the basic state pension and the new state pension will continue to rise. In fact, this winter the new state pension is worth £900 more than it was a year ago and the new state pension is likely to rise by a further £450 next April.

“Indeed, during the course of this Parliament, because of the triple lock the new state pension is likely to be worth £1,700 more, much more than the value of the winter fuel payments.”

At his final exchange with Ms Reeves over the despatch boxes, Conservative shadow chancellor Jeremy Hunt said: “Before tomorrow’s fireworks, can I … wish the Chancellor well in her role going forwards. There has actually been a lot of common ground between us, for example, when before the election she said that raising employers’ national insurance was a jobs tax that took money out of people’s pockets.

“I very much agree with her on that. Does she agree with herself?”

Mr Hunt shook his head as Ms Reeves replied: “(Mr Hunt) knows better than almost anyone else that there was a £22 billion black hole in the public finances. That will require difficult decisions but even in those circumstances, we will do everything in our power to protect the incomes of ordinary working people, and so we are committed to ensure that in their payslip, no working people will have higher taxes after this budget.”

The shadow chancellor responded: “We all know why she’s inventing this fictitious black hole. Thirty times this year before the election she promised not to raise tax and tomorrow she’s planning the biggest tax-raising budget in history.”

He said “the strongest signal of resolve that we can send to (Russian president Vladimir) Putin is to commit to 2.5% of GDP on defence”. According to House of Lords Library research, the UK is on course to spend around 2.33% of its GDP on defence in 2024.

Ms Reeves told MPs: “It is important that we don’t deny the seriousness of the situation that we face with the black hole in the public finances.”

She added: “I watched my party lurch towards an ideological extreme and deny reality, and as a result, we spent years in opposition. The shadow chancellor risks taking his party down the same path.”