Britain’s middle classes face a significant financial blow as the Chancellor prepares to extend VAT to previously exempt services.

Treasury officials are actively exploring options to impose the tax on private medical insurance and financial services.

This move represents a reversal of Rachel Reeves’s earlier commitment to avoid further tax increases.

The Chancellor had previously assured business leaders that last year’s Budget would be a singular event, promising no additional borrowing or taxation.

Government insiders have confirmed that applying VAT to private healthcare could generate approximately £2billion in revenue.

This would directly affect up to eight million households who rely on private medical coverage, the Daily Mail reports.

The Treasury is also considering reducing the VAT registration threshold for small enterprises.

This is despite industry calls for an increase to stimulate economic growth.

The Chancellor defended her policy reversal during a BBC interview.

Ms Reeves said: “I think everyone can see the world has changed in the last year and we are not immune to that.”

This marked a departure from her November assurance to the Confederation of British Industry that she would not be “coming back with more borrowing or more taxes”.

During her Labour Party Conference address in Liverpool, Ms Reeves hinted at further fiscal measures ahead.

She warned delegates: “In the months ahead we will face further tests, with the choices to come made all the harder by harsh global headwinds and the long-term damage done to our economy, which is becoming ever clearer.”

The Chancellor urged the public to “have faith” in her economic strategy despite abandoning previous commitments.

These proposals would burden families already struggling with NHS waiting lists who have turned to private healthcare.

Sources within Whitehall revealed that broadening the VAT base represents an alternative to increasing the headline rate.

This would avoid breaching manifesto commitments.

One government insider said: “Raising the headline VAT rate is going to be very difficult after all the promises that have been made. But there are ways of broadening the VAT base that could raise significant sums. We have already seen that with VAT on private school fees – you could now see it with private medical insurance and some of the other items that are exempt.”

The extension of VAT to financial services would create additional costs for millions using banking and investment products.

Sir Mel Stride, the Shadow Chancellor, condemned the Government’s abandonment of its electoral promises.

He said: “Under Labour, nothing is safe – not your job, savings, or pension. Rachel Reeves says she won’t risk the public finances, but she’s already doing that – with more borrowing, higher spending, and more taxes.”

The Conservative frontbencher highlighted the substantial fiscal burden already imposed by the Government.

He said: “Labour has raised taxes by £40billion per year, including a £25billion tax on jobs, and now won’t rule out coming back for more.”

These criticisms underscore growing concerns about the Government’s credibility regarding its manifesto pledges.

The original commitment to maintain a “tax lock” protecting working people from increases in VAT, income tax, and National Insurance appears increasingly vulnerable.

The Chancellor has indicated that gambling companies may face increased taxation to fund the removal of the two-child benefit cap.

Ms Reeves said there was “a case for gambling firms to pay more” during her conference appearance.

Chief Secretary Darren Jones declined to provide assurances about VAT levels, despite Labour’s manifesto pledge to maintain current rates.

He said: “The manifesto stands today because decisions haven’t been taken yet.”