Rachel Reeves: Taxpayer cash ‘going up in smoke under this government' - EXCLUSIVE

UK Parliament / Jessica Taylor
Shadow chancellor Rachel Reeves told Yahoo News UK the government is letting tax payer money "go up in smoke" while hiking taxes on working people. (UK Parliament/Jessica Taylor)

The shadow chancellor has accused the government of "burning taxpayer cash" amid the spiralling cost-of-living crisis.

Rishi Sunak is under growing pressure to support vulnerable Brits who are set to be saddled with the highest tax burden since the 1950s, despite cuts announced by the Chancellor in his spring statement.

Inflation has also accelerated to a 30-year high of 6.2%, driven by soaring energy bills and rising prices of food and petrol.

Experts have accused the chancellor of being a "fiscal illusionist" amid warnings that, without further support, the combination of factors will push more than 1m Brits - including 500,000 children - into absolute poverty in 2022/2023.

Labour's shadow chancellor, Rachel Reeves, told Yahoo News UK that Sunak has "bad economics" and that hiking taxes during a cost-of-living crisis is the wrong decision.

British Prime Minister Boris Johnson and Chancellor of the Exchequer Rishi Sunak walk out of Downing Street to meet Michelle Ovens of Small Business Saturday, in London, Britain, December 1, 2021. REUTERS/Henry Nicholls
The government have been warned that more than 1 million Brits, and 500,000 children, risk falling into absolute poverty in 2022-2023 without more financial support. (Reuters) (Henry Nicholls / reuters)

"There's no other major advanced economy that's increasing taxes on working people right at the peak of the cost-of-living crisis," said Reeves.

"It's irresponsible [to raise taxes now] because our recovery is fragile as we come out of the pandemic, and then to whack taxes up at this time - it's just not the right approach."

The MP for Leeds West also suggested the government had betrayed taxpayers with the billions of pounds spent on unusable PPE.

"[Look at the] £8.7bn the National Audit Office say [the government] overspent on PPE - some of which is now being burned," said Reeves. "The taxpayer's money is literally going up in smoke because of the mismanagement of Tory ministers."

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She also highlighted the resignation of Treasury minister Lord Agnew, who quit over the “schoolboy” handling of fraudulent COVID business loans.

The Treasury is reportedly set to write off about £4.3 billion of Covid loans, with money having gone to “fraudsters”. The Treasury has since disputed this figure.

"[Look at] former Tory Minister Lord Agnew, who resigned - and said that 'the pandemic was a good time to be crook'," said Reeves.

She added: "It's not the chancellor's money, it's not the prime minister's money to write off - it's taxpayers' money. And taxpayers want that money back.

"And when the government keep coming to working people and saying: 'You've got to pay more in tax because we need more money for this, more money to that' - if they managed the money that they do get, we might not be in this situation today."

The shadow chancellor said Labour's costed energy bill scheme would save households £600 on average and would not be repayable. (UK Parliament/Jessica Taylor) (Nikki Powell WWW.NK-PHOTOGRAPHY.CO.UK)

Reeves, a former economist at the Bank of England, said she would drop tax hikes and implement more extensive measures to help Brits struggling with their energy bills, the main driver in rising prices.

Sunak has announced a £9bn scheme to support Brits, including a non-repayable £150 council tax rebate for bands A-D, alongside a £200 energy discount - which has to be repaid over five years by every household.

The scheme has been widely criticised as a "heat now, pay later" arrangement that risks pushing the most vulnerable into more debt.

Read more: 'Woefully out of touch': The group of people ignored by Rishi Sunak’s spring statement

Reeves said she would to introduce a "different package" to help households struggling with the cost-of-living crisis.

This would include a package to cut most households' bills by £200 including cutting VAT on home energy bills, plus increasing and extending the Warm Homes Discount scheme to a third of all households to cut their bills by £600 in total.

Labour say this would be funded by a one-off windfall tax, worth around £2-3bn, on oil giants - who are seeing huge profits amid the rocketing cost of fuel.

"The current chief executive of BP says that their company's got more money than they know what to do with," said Reeves. "So why not [tax their profits]? Why not? It's not like it's some unprecedented, Marxist, money-grab: George Osborne did this on the profits being made by North Sea oil and gas companies to reduce fuel prices."

British Chancellor of the Exchequer Rishi Sunak speaks at a statement on the economic update session, at the House of Commons in London, Britain March 23, 2022. UK Parliament/Jessica Taylor/Handout via REUTERS  ATTENTION EDITORS - THIS IMAGE HAS BEEN SUPPLIED BY A THIRD PARTY. MANDATORY CREDIT. IMAGE MUST NOT BE ALTERED.
The chancellor has rejected calls to increase benefits in line with inflation putting him at odds with many of the UK's most senior economists. (Reuters) (Handout . / reuters)

The government has rejected such a move claiming it could deter oil companies from investing billions in green energy.

The shadow chancellor also called on the government to look at up-rating benefits in line with inflation, something supported by a growing number of senior economists - but a move that the Treasury ruled out last week.

"Eventually, the high inflation that we're seeing now will feed through to higher benefits next year," she said. "But, hopefully by then, some of these cost of living pressures would have receded.

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"So let's bring forward some of the money, so that people actually get it when they need it.

"The Resolution Foundation has said this doesn't have a long term impact on the public finances - because it's just shifting money from one year to another."

Watch: Chancellor is making 'poorest poorer', says Rachel Reeves