After blaming the Conservatives for leaving a ‘£22bn black hole’ in the government finances, the chancellor Rachel Reeves said that ‘difficult decisions’ will have to be made, admitting for the first time she plans to raise taxes in the Budget this autumn.

Speaking on the News Agents podcast, Reeves said: ‘I think that we will have to increase taxes in the Budget.

‘We had in our manifesto a commitment to fiscal rules to balance day-to-day spending through tax receipts and, by the end of the forecast period, to get debt down as a share of GDP. Those are sensible fiscal rules to keep a grip on the public finances.

‘We also made other commitments in our manifesto, not to increase National Insurance, VAT or income tax for the duration and we’ll stick with those.’

However, when asked if any u-turns would be made on NI or income tax, the Chancellor said: ‘We stick by everything in our manifesto’.

Jeremy Hunt, the shadow chancellor, was quick to criticise the decision, saying it would be the ‘biggest betrayal in history’ to raise the taxes of the British public.

Although Reeves would not give any indication of which taxes are likely to be increased, capital gains tax (CGT) and inheritance tax are seen as the likeliest taxes by most experts.

There are two options on CGT, raising the 28% rate to say 30%, which would be a modest increase and should not dent business confidence and entrepreneurship, or the more radical approach of bringing CGT in line with income tax.  

On inheritance tax, thresholds are frozen until April 2028 but they could be reduced to bring more estates into the death tax.

There are also expectations that the Chancellor will look at pensions tax relief which could be damaging, creating a tax environment where it is more tax effective to save in an ISA than contribute to a pension.

Some commentators are even mooting the idea of a 2% wealth tax, but the government is unlikely to move on this unilaterally when the G20 is reviewing how a global wealth tax would work.

Earlier this week, Reeves agreed to bump up public sector pay by between 5% and 6% which will cost £10bn a year, while offering junior doctors a 22% pay rise over two years which some believe is the reason for an estimated £16bn of the black hole.

The Chancellor has already scrapped many infrastructure projects across the country, such as the Stonehenge tunnel works, in a bid to scrape together billions of pounds to balance the books.

She has also cut the winter heating benefit payment saving £1.5bn a year, while calling for 2% departmental spending cuts to help pay for the public sector pay deal.

Additional reporting by Sara White