Ministers struggle to quell mounting panic over tax raid in Budget

Ministers were today struggling to quell mounting panic over tax raids and pubic services cuts in the Budget.

As Labour conference gets under way in Liverpool, Keir Starmer tried to cool fears by stressing that there is 'no much room for tax rises'.

Meanwhile, Chancellor Rachel Reeves ruled out creating a new 'wealth tax' or scrapping the single person council tax discount.

The more emollient tone emerged as the PM effectively acknowledged the grim warnings about the state of the country had gone too far, suggesting that he wanted to talk about positive change. 

Not even three months after the historic election landslide, the party is being buffeted by rows over taking freebies, briefing against No10 chief aide Sue Gray, and the winter fuel allowance axe.

Sir Keir and Ms Reeves have been warning of 'pain' to come in the fiscal package on October 30.

They have blamed a £22billion 'black hole' left in the books by the Tories - even though critics point out public sector workers have been handed huge pay rises. 

In an interview with the Observer, Sir Keir said: 'People have had a lot of tax rises and there's not much more room for tax rises. That's why I made the commitment in relation to working people.' 

He also tried to calm tensions with unions by insisting there will be no return to austerity. 

'I'm acutely aware that our public services are on their knees, and there will always be some that say there's an argument for deep cuts,' he said.

'I ran a public service. I know what cuts feel like. And I know that a lot of them are cut to the bone. And therefore we have got to make sure that our public services are functioning properly.' 

Ms Reeves told the Sunday Times she was 'not looking at creating some new tax, or a wealth tax'. 

She is also believed to have abandoned the idea of ditching the council tax discount - amid concerns that would be branded a 'widow tax'. 

The Chancellor said she had to be 'honest' about the state of the finances. 

'If you don't deal with the problem, you're not going to make Britain the best place to invest, which will help us to realise the prize,' she said.

'I know that if we can bring stability back, if we can create the environment where businesses invest, because investment is the biggest driver of economic growth, then we can realise this prize that has eluded us the last few years, which is a vibrant, successful economy creating good jobs [and] productivity growth in all parts of the country that actually makes people better off.'

However, Ms Reeves tried to reassure businesses that workers' rights reforms and taxes.

'Businesses have got absolutely nothing to fear from our proposals. We have been, and will continue to, consult extensively with businesses on them. 

'We said that we're going to be the most pro-growth government ever, but we believe being pro-business and pro-worker are two sides of the same coin,' she said.

'Businesses want well-trained workers, they want to reduce the economic inactivity rate so they've got access to staff. 

'And working people need successful businesses willing to take a punt on them and to hire them in all parts of the country. So 'make work pay' is about ensuring that working people benefit from a growing economy.'