Chancellor ditches manifesto-busting income tax hike plans – reports
Rachel Reeves has abandoned plans to break Labour’s manifesto pledge and raise income tax at this month’s Budget, it has been reported.
The Chancellor had been expected to hike income tax in the face of a yawning gap in her spending plans, hinting as recently as Monday that the alternative would be “deep cuts” to public investment.
But the Financial Times has reported that she has now abandoned those plans over fears they could anger both voters and backbench Labour MPs.
The decision was communicated to the Office for Budget Responsibility on Wednesday, when the Chancellor submitted a list of “major measures” to be included in her Budget on November 26, according to the newspaper.
An income tax rise would help her bridge a fiscal black hole estimated by some economists to be as much as £50 billion, but it would also break Labour’s clear manifesto pledge not to raise income tax, national insurance or VAT.
The prospect of a manifesto breach drew criticism earlier this month from Labour’s new deputy leader Lucy Powell, who said it would damage “trust in politics”.
Having vowed not to return to “austerity” through deeper spending cuts, the Chancellor could now have to rely on increases in a wider range of smaller taxes if she is to stick to her self-imposed rules on debt and borrowing.
The Financial Times suggested that one option would also be to reduce income tax thresholds while keeping tax rates the same, which could raise billions of pounds for the Treasury.
Ms Reeves began November with a speech in which she failed to rule out an income tax hike, having previously said that Labour would stick to its manifesto commitments.
On Monday she told the BBC that sticking to those commitments “would require things like deep cuts in capital spending” that could harm productivity growth.
Conservative leader Kemi Badenoch said the reported U-turn was “good (if true)”.
In a post on X, she said: “Only the Conservatives have fought Labour off their tax-raising plans.
“But one retreat doesn’t fix a Budget built on broken promises. Reeves must guarantee no new taxes on work, businesses, homes or pensions – and she should go further by abolishing stamp duty.”
Liberal Democrat deputy leader and Treasury spokeswoman Daisy Cooper described the move as an “11th hour screeching U-turn” but said struggling families could be spared “yet another punch in the stomach Budget”.
She said: “The Chancellor should look at our plan for a windfall tax on the big banks’ billions in profits and put £270 back into people’s pockets.”
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All options are terrible at this point. Break a pledge or accept public services will deteriorate massively over the next 10 years.
Is a shame Reeves and Starmer seem to have (once again) lost their nerve on something in the face of a onslaught of attacks from the right wing british media – as increasing income tax would have been one of the few things this inept uk labour govt would have got right. The fact of the matter is if we want decent public services and a effective nhs we have to be willing to pay for them…and the best way of doing that is thru general taxation. For too long – probably since thatchers time – weve been allowed to… Read more »
I agree that we have to pay for decent public services; but the problem is that regardless of how much money is pumped in, they don’t improve – particularly the NHS. The tolerance for tax increases is all but gone – spending cuts seem inevitable.
This sense of endless money pumped in with no obvious benefit is a myth that I’m surprised you’ve fallen for. Because there’s two problems with the “we’re spending more than ever before” line that gets trotted out. First it never considers inflation, so a 2% boost when 4% is needed just to stay the same is both “more than ever before” and a 2% cut in real terms. Second it never considers changing need, whether that’s population size or an aging demographic. Right now everything is grinding to a halt because the boomer boom is inevitably consuming more health, housing… Read more »
The right-wing press might wonder what they’ve done if their faux outrage over pledges results in the wealthier paying the price.
Tax the banks and billionaire,that,s all that s required,then problem solved,Simples!
Was this the press thinking she was or she said she was.
lost track now.