Rachel Reeves's £750m 'taxi tax' to clobber passengers and strike 'hammer blow'

Labour's "taxi tax" would clobber vulnerable passengers while dealing a hammer blow to the night-time economy, the Tories have warned.

Sir Keir Starmer's party has refused to rule out slapping 20% VAT on private hire journeys.

Richard Holden MP, Shadow Secretary of State for Transport, said: "Labour's taxi tax would clobber vulnerable passengers and working families, while dealing a hammer blow to the night-time economy. From rural towns to city centres, people who depend on private hire to get home safely after work or a night out would be priced off the road entirely.

"Labour refuse to rule this out for a reason because they're planning it. They're in this position because Keir Starmer has no backbone, a weak team around him, and no plan.

"Combined with Rachel Reeves' multi-billion-pound black hole in the public finances, it means yet another stealth tax to paper over their economic disaster class."

Currently, taxi firms outside of London do not have to charge VAT on journeys because their drivers are classed as self-employed contractors.

But Labour could rewrite rules at next month's budget so that all local operators are treated as VAT principals, effectively extending 20% VAT to fares that are currently exempt.

This measure, dubbed a "taxi tax", could hit those who rely most on private hire vehicles, including people in rural areas and passengers with disabilities.

Industry estimates suggested the change would raise £750 million a year and add around £2 to £3 to a typical £12 journey, costing frequent users hundreds of pounds each year.

Mr Holden said: "Rachel Reeves has driven the economy into a multi-billion-pound black hole, and now she's coming for commuters and cab users to fill it. The meter's running, the bill's rising, and Labour's driving Britain in the wrong direction. Labour must slam the breaks and rule the Taxi Tax out now."

A HM Treasury spokesman said: "We don't recognise these figures. We take this issue very seriously and recognise its complexity. We are reviewing feedback from our recent consultation and will publish our detailed response shortly."