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Rachel Reeves has dropped her strongest hint yet she will increase income tax in her November Budget . The Chancellor also criticised the two child benefit cap, comments that will fuel speculation the limit is to be scrapped . Labour went into the general election promising not to increase income tax, national insurance or VAT . But a massive black hole is likely to force a u-turn which Labour backbenchers fear will punish the party. In an interview with BBC Radio 5 Live, Reeves signalled the income tax commitment is likely to be axed: “It would, of course be possible to stick with the manifesto commitments, but that would require things like deep cuts in capital spending and the reason why our productivity and our growth has been so poor these last few years is because governments have always taken the easy option to cut investment. “And as a result, we’ve never managed to get our productivity back to where it was before the financial crisis." “So we’ve always got choices to make, and what I promised during the election campaign was to bring stability back to our economy, and what I can promise now is I will always do what I think is right for our country.” She added: “So those final decisions haven’t been taken yet, but as I take those measures, I will do what I believe is right for our country, and sometimes that means not always making the easy decisions, but the decisions that I think are in our national interest.” An income tax rise in the UK Budget would not automatically be replicated in Scotland as this tax lever is devolved to Holyrood. However, experts say a two pence hike south of the border would create a £1bn funding black hole for Holyrood. SNP Finance Secretary Shona Robison admitted over the weekend income tax may rise in Scotland as a consequence of Labour’s decisions. Reeves' Budget may also coincide with the publication of the Government’s strategy on child poverty. Labour has kept the Tory two child cap on the grounds of cost, but speculation is mounting the Government will change course. Reeves said: “In the end, a child should not be penalised because their parents don’t have very much money. Now, in many cases you might have a mum and a dad who were both in work, but perhaps one of them has developed a chronic illness, perhaps one of them has passed away. "There are plenty of reasons why people make decisions to have three, four children, but then find themselves in difficult times. “You will also have things like adoption or foster caring. Lots and lots of different reasons why families change shape and size over time, and I don’t think that it’s right that a child is penalised because they are in a bigger family through no fault of their own." To sign up to the Daily R ecord Politics newsletter, click here
