Sir Keir Starmer has warned the country to expect tax rises when Rachel Reeves sets out her budget on Wednesday.

In a speech in Birmingham, the Prime Minister insisted “better days are ahead” but that there would need to be “trade-offs”.

There would, he added, be “no shortcuts.”

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Labour’s manifesto explicitly stated that they would “not increase taxes on working people” going on to state that they would “not increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT.”

However, in recent weeks, there have been questions over exactly how the party is defining “working people.”

Last week, Sir Keir suggested those who make money from assets such as property would not meet the definition.

There is also an expectation employer national insurance could increase by at least one percentage point, while the freeze on income tax thresholds could also be extended, pulling people into paying higher rates.

The Chancellor is also thought to be looking at rises to capital gains tax and inheritance tax.

Answering questions from journalists after his speech, the Prime Minister said the working people of Britain “know exactly who they are”

They are people, he added, who “have been working harder and harder for years, just to stand still”, and who are “doing the right thing maybe still finding a little bit of money to put away”.

In his speech, Sir Keir said the government needed to run “towards the tough decisions” as “ignoring them set us on the path of decline”.

He continued: “That is our choice. Stability to prevent chaos. Borrowing that will drive long-term growth. Tax rises to prevent austerity and rebuild public services. We choose to protect working people. We choose to get the NHS back on its feet. We choose to fix the foundations reject decline and rebuild our country with investment.”

The Labour leader added: “The time is long overdue for politicians in this country to level with you honestly about the trade-offs this country faces, to stop insulting your intelligence with the chicanery of easy answers.

“Working people know that hard choices are necessary. They lived through the Liz Truss episode. They lived through the cost-of-living crisis.

“So they know that the things they want from us – protecting their living standards, building our nation, fixing our public services – they know that this can only be achieved alongside economic stability.

“There are no shortcuts.”

One of the trade-offs will be a hike to the cap on bus fares in England. 

Currently, commuters south of the border pay no more than £2 for a single fare when getting the bus, but the Prime Minister has confirmed this will jump to £3 at the end of the year.

“The Tories only funded [the £2 fare cap] until the end of 2024, and therefore that is the end of the funding in relation to the £2 bus fare,” Sir Keir said.

Asked whether he could guarantee that taxes would not rise in future budgets, he said: “I’m going to resist the temptation to say that at no point ever will there ever be an adjustment to everything else in the future.”

SNP Westminster Leader Stephen Flynn hit out at the Labour leader:  “Keir Starmer spent this morning lecturing the public that we all need to face up to the ‘harsh fiscal reality’ – but he needs to finally wake up to the harsh political reality that he sailed into power promising 'change' and he is now imposing cuts on the public and raising taxes for community businesses.  

 “After 14 years of the Tories, cynically framing this budget as being about ‘tough decisions’ and ‘hard choices’ feels all too familiar from a Labour Party desperately trying to justify their austerity."