Rachel Reeves has jetted to Saudi Arabia as she scrambles to push through a trade deal with Gulf states.
The Chancellor is using a visit to Riyadh this week to try to make progress on an agreement with the Gulf Co-operation Council (GCC).
It comes as Ms Reeves tries to convince official forecasters of her efforts to boost economic growth ahead of her Budget next month.
She is likely to point to trade deals – including one with Gulf countries – as well as planning reforms being rushed through Parliament.
The Treasury is haggling with the Office for Budget Responsibility over how much these policies will boost growth.
If the watchdog gives a favourable view of Labour‘s efforts and boosts its official growth forecasts, it could relieve some of the huge pressure on the Chancellor to balance the books through tax rises or spending cuts.
Ms Reeves is estimated to be facing a black hole in the public finances of billions of pounds, which has left her considering even more levy hikes.
There is speculation this could see her break Labour’s manifesto pledges and raise income tax, while the Treasury is also considering proposals for a mansion tax.
Rachel Reeves spoke at Fortune Magazine’s global forum in Riyadh, Saudi Arabia
Speaking at Fortune Magazine’s global forum in Riyadh on Monday, Ms Reeves confirmed she was looking at tax changes ahead of the Budget.
The Chancellor suggested the Government needed to ensure there was ‘sufficient headroom’ above its spending plans.
Asked if she was considering tax rises in the Budget, Ms Reeves replied: ‘The underpinning for economic growth is stability and I’m not going to break the fiscal rules that we’ve set.
‘We are going to reduce that primary deficit, we are going to see debt starting to fall as a share of GDP, because we need more sustainable public finances, especially in the uncertain world in which we live today.
‘So, growth will be a big part of that Budget story, in a way that, frankly, I think growth has been neglected as a tool of fiscal policy in the last few years.
‘We are looking, of course, at tax and spending to ensure that we both have resilience against future shocks by ensuring we’ve got sufficient headroom, and also just ensuring that those fiscal rules are adhered to.’
The Chancellor acknowledged she arrived ‘a little bit late’ for her event at the Fortune conference, telling the audience it was a result of ‘really good meetings’ about the GCC deal.
Ms Reeves said she hoped conference attendees ‘will agree that’s worth it, if we can get that GCC deal over the line’, and later added: ‘And yes, I am confident that we can get that deal over the line.’
Asked if she was considering higher taxes on the wealthy at the Budget, Ms Reeves insisted that ‘there is another way to improve the fiscal position: growing the economy’.
But she also defended the Government’s approach to the very rich, when asked about why some were leaving the UK for other countries.
‘Everybody knows that countries around the world are having to spend more on defence that we need to rebuild our public finances and our public services, and everyone who makes Britain their home should contribute to that,’ the Chancellor said.
She added: ‘We don’t want to drive anyone out of the UK, but we do want to make sure that we tax people fairly, people who make Britain their home, whichever country they or their parents are originally from.’
The GCC represents Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.
Ms Reeves, the first chancellor to visit the Gulf in six years, is this week attending the Future Investment Initiative (FII).
She will also meet senior Saudi royals, US administration figures and global business chiefs.
A series of announcements on investment between the UK and Saudi Arabia are expected over the coming days.
A key priority will be accelerating progress on a trade deal with the GCC which the Treasury hopes could add £1.6billion to the UK economy and contribute an additional £600million to UK workers’ annual wages in the long term.
Ms Reeves is expected to set out an ambition to work constructively towards this on both sides in her conversations with Gulf counterparts, while acknowledging ‘areas of divergence and cultural differences’, according to officials.
Ahead of her trip, the Chancellor said: ‘Our number one priority is growth, so I am taking Britain’s offer of stability, regulatory agility and world-class expertise directly to one of the world’s most important trade and investment hubs, making that case in our national interest.
‘After our landmark deals with the US, EU and India, we’re determined to build on that momentum by going further and faster on partnerships that create good jobs, boost business and bring investment into communities across the UK – from the North East to the Oxford-Cambridge corridor.’
Ms Reeves will speak at the Future Investment Initiative (FII) – nicknamed ‘Davos in the Desert’ – on Tuesday to persuade business leaders that the UK is a stable investment destination.
With the prospect of being forced to use tax hikes or spending cuts in the Budget to meet her commitment to balancing day-to-day spending with tax receipts rather than extra borrowing, Ms Reeves will stress her ‘ironclad’ commitment to the fiscal rules.
The IFS think-tank has warned Ms Reeves has a £22billion black hole to fill in her package on November 26.
But it suggested the Chancellor might want to drum up an extra £20billion to ensure she does not have to come back yet again for more cash.
Other economists have calculated that the Government could have an even bigger gulf of £50billion in the public finances.
