Rachel Reeves urged to 'go big' after Chancellor confirms she WILL raise taxes in next Budget

Ms Reeves confirmed last night that taxes on the wealthy would be "part of the story" - adding that critics of her previous tax raids were "bleating scaremongerers".

After hiking taxes on private school fees and non-doms last year, some of Britain's richest fled the country, taking their tax contributions with them and forcing London out of the top five richest cities in the world.

But the Chancellor has now dismissed the departures altogether.

She told The Guardian: "Last year... there was so much bleating that it wasn’t going to raise the money - that people would leave."

Ms Reeves added: "That scaremongering didn't pay off, because this is a brilliant country and people want to live here.

"And I think, when people scaremonger again this year, we should take some of that with a pinch of salt."

Yesterday marked the first time the Chancellor publicly confirmed tax rises would be on the cards on November 26.

Now, the IFS has warned the Chancellor may need to find at least £40billion to avoid a £22billion black hole.

It estimates her headroom will be reduced by £6billion from policy U-turns, £5billion from higher interest costs and £11billion from underperforming growth.

She is also bracing for a productivity downgrade by the Office for Budget Responsibility after years of over-optimism.

"If the OBR produces a much smaller downgrade than lots of people are expecting, maybe it is easier to get back to £20 or £30billion headroom," associate director Ben Zaranko said.

"If the OBR actually produces something that looks really quite negative, then the size of consolidation required maybe starts to look dauntingly big."

IFS director Helen Miller said swings of as much as £20billion in the OBR's forecasts were not unusual and there was a case for a "chunkier" tax rise to increase the Chancellor's headroom.

So far, Ms Reeves has rejected calls for a wealth tax - but raising capital gains tax, raiding banks or levying national insurance on rental income have not been ruled out.

Ms Miller acknowledged that chasing a greater headroom was a "political choice".

"This is not 'IFS says do £40billion of tax rises', this is 'IFS says you're probably going to need a fiscal consolidation, you might want to do a bigger one'," she said.

"There is a strong case to do something big enough that you don't keep getting back into fiscal Groundhog Day."

Launching a three-way blame attack yesterday, Ms Reeves said: "Austerity, Brexit, and the ongoing impact of Liz Truss's mini-Budget... all of those things have weighed heavily on the UK economy."

But the Tories accused her of blaming "someone else" every time the numbers "don't add up".

Shadow Chancellor Sir Mel Stride told the Mail: "The Chancellor should start owning up to her own mistakes and accept responsibility for the poor decisions she has made - letting spending spiral, failing to reform welfare, and hammering families with higher taxes to cover her own economic mismanagement.

"A theme is emerging: when things go wrong, it's never Rachel Reeves' fault - but it's always your family that pays the price."

A Treasury spokesman said: “We won’t comment on speculation ahead of the OBR’s forecast, which will be published on November 26.

“The Chancellor has always been clear that she will provide stability in the public finances, because when governments lose control of the finances, working people pay the price.

“We were the fastest-growing economy in the G7 in the first half of the year, but for too many people our economy feels stuck.

“They are working day in, day out without getting ahead. That needs to change, and that is why the Chancellor will continue to relentlessly cut red tape, reform outdated planning rules, and invest in public infrastructure to boost growth - not return to austerity or decline.”