Be ruthlessly honest with the public, Reeves is told

Ex-governor of the Bank of England advises the chancellor to tackle national insurance, pensions and vested interests’

- DAVID MADDOX

Former Bank of England governor Mervyn King has made a dramatic political intervention, warning Rachel Reeves that she must raise national insurance in her Budget on 30 October.

According to the Institute of Fiscal Studies (IFS), the chancellor has an estimated £25bn black hole to fill in order to meet Labour’s spending commitments.

But in an open letter published in The Independent today, Lord King warns her against higher borrowing.

Lord King, who was once the chancellor’s boss at the Bank of England, has told her: “Keep it simple and be ruthlessly honest with the public.”

And he warned: “Resist the temptation to fiddle with the tax system – it is time to take a proper look at the various schemes that have been introduced by successive chancellors since the last major overhaul by Nigel Lawson.”

But the Tories have claimed that, if she raises any form of national insurance, as has been hinted, it would be a breach of the manifesto promise to voters – a point the IFS’s Paul Johnson echoed on Monday. He said: “It seems to me that would be a straightforward breach of a manifesto commitment. I went back and read the manifesto and it says very clearly, ‘We will not raise rates of national insurance.’ It doesn’t specify employee national insurance.”

Mr Johnson had previously warned during the election that the main parties’ tax-and-spend pledges represented a “conspiracy of silence” on the true picture of the country’s finances.

In a warm open letter that harked back to her days as a graduate entrant at the Bank, Lord King made a point that the baton has now been passed to Ms Reeves and her generation.