Kemi Badenoch has accused the Chancellor of plotting a “stealth tax bombshell” in the autumn Budget next week. The Conservative Party leader condemned what she described as Rachel Reeves’s plan for a fiscal assault on working people through fiscal drag.

This happens when tax allowances are frozen while incomes or inflation increase. Speaking at a party conference on Tuesday, Mrs Badenoch said: “What they are planning to do is freeze income tax thresholds, so that more and more people are dragged into higher rates through a stealth tax bombshell.”

Income tax thresholds have been fixed since April 2023 and are currently due to stay frozen until April 2028.

However, there is speculation that the Chancellor could extend the freeze to 2030, a move reportedly expected to raise an additional £8.3billion per year.

By 2029-30, this would affect a total of 42.1million income tax payers – an increase of 960,000 compared with the current plan.

Mrs Badenoch continued: “Rachel Reeves even said at the last Budget that extending the threshold freeze would hurt working people – take money out of their pay slips. But apparently, she doesn’t mind doing that if it’ll fund more benefits and shut her backbenchers up.”

Mrs Badenoch said the Chancellor is planning to scrap the two-child benefit cap, which will increase spending by £3.5billion and result in “more taxes to pay for more welfare spending”.

Mrs Badenoch added: “Funnily enough, the amount she will raise for breaking her promise on thresholds is almost exactly what she needs to splurge on welfare. The fact is, they are hiking taxes on people in work to give handouts to people out of work.

“If this Labour Government scraps the two-child benefit cap, I want people to know that a future Conservative government will bring it back.”

Mrs Badenoch also hit out at Reform UK, as Nigel Farage held a rival press conference on Tuesday ahead of the Budget.

She said: “Right now, Nigel Farage and Zia Yusuf are holding a press conference on how they would save money, but in reality, they want to increase benefits by scrapping the two-child benefit cap. They just don’t get it.”

She accused Mr Farage of deceiving voters with his suggestion of stripping welfare payments from European Union citizens who have settled status in post-Brexit Britain.

She said: “It would be a bad idea because we spent a lot of time negotiating those rights, not just for EU citizens in this country, but British citizens in other countries of the EU.

“You start unpicking that and you start unpicking all of the work that was done, year after year after year, with a lot of pain and effort during those years when we were negotiating Brexit.”

She added that it was “completely ridiculous” for Mr Farage to say he would just renegotiate that settlement. Mrs Badenoch said: “I’m a former trade secretary. Even with friendly countries, trade negotiations are very, very difficult. It is wrong of him to deceive people, lie to them and make them think this is going to be easy.”

Labour Party chairwoman Anna Turley responded to Mr Farage and Mrs Badenoch’s pre-Budget speeches.

She said: “Reform and the Tories can argue all they like about who will return us to austerity faster – the fact is their plans don’t add up and would be a disaster for Britain.

“Nigel Farage is happy to trigger a trade war with Europe, hammering shoppers at the checkouts with higher prices and undoing the work the Labour Government has done to drive prices down through three landmark international trade deals.

“Kemi Badenoch’s plan to bring forward £47billion of cuts would mean money drained out of your local hospital, your child’s school and your local police.

“Families who are still bearing the brunt of Liz Truss’s mortgage-smashing mini-Budget can’t afford to pay the price for more of the same old Tory mistakes.

“Labour’s Budget will take the fair choices to deliver strong foundations for our economy and secure our country’s future, with no return to austerity and no borrowing beyond our means.”