Chancellor Rachel Reeves is no longer planning to break Labour’s manifesto pledge not to increase income tax in the Budget, according to bombshell reporting
Rachel Reeves has ripped up her plan to break Labour’s manifesto pledge not to increase income tax in the Budget, according to bombshell reporting.
It is despite the Chancellor having having paved the way for tax rises – including in a speech and in radio interviews – for weeks.
Ms Reeves insisted on Monday no final decisions have been made on tax and spending – with just a fortnight to go before her. But, on the same day, she also dropped a major signal she was going to hike taxes after saying it will not be possible to stick to Labour’s manifesto promises on tax without “deep cuts” in spending.
It comes after she gave an unprecedented pre-Budget speech last week, where she paved the way for tax rises in her November 26 financial statement.
READ MORE: Chancellor Rachel Reeves drops two major Budget hints on tax and benefits
But in a dramatic change in position, Downing Street has changed course, the Financial Times reported last night. It comes after a rocky few days for Keir Starmer after his allies briefed that he is ready to fight a leadership challenge. A Labour civil war has since erupted after suggestions were made that Wes Streeting is plotting a Leadership coup – something the Health Secretary denies.
According to the FT, Ms Reeves is now looking at other ways to fill a multi-billion pound black hole in the public finances. One option she is reportedly considering would involve cutting the thresholds at which people pay rates of income tax, while leaving the basic and higher rates of tax unchanged.
Her original plans were said to involve raising income tax rates by 2p, while also cutting national insurance rates by 2p. It would have seen no impact on “working people” but would have seen people like landlords and pensioners pay more tax.
In a speech last Tuesday, Ms Reeves paved the way for manifesto-breaking tax rises – saying voters will understand the financial pressures she faces. In an unusual pre-Budget speech in Downing Street, Ms Reeves said she has to “face the world as it is, not the world I want it to be”. And asked if she was prepared to lose the next election by making unpopular choices, she vowed to “put the country first”.
The Chancellor said in her speech: “As Chancellor I have to face the world as it is, not the world as I want it to be. And when challenges come our way, the only question is how to respond to them, not whether to respond or not.”
She went on: “If we are to build the future of Britain together, we will all have to contribute to that effort. Each of us must do our bit for the security of our country and the brightness of its future.”
And in an interview with BBC 5 Live on Monday, Ms Reeves said: “I will set out the choices in the Budget. It would, of course be possible to stick with the manifesto commitments, but that would require things like deep cuts in capital spending and the reason why our productivity and our growth has been so poor these last few years is because governments have always taken the easy option to cut investment – in rail and road projects, in energy projects, in digital infrastructure.”
Culture Secretary Lisa Nandy this morning refused to be drawn on details of the Budget. She said the Chancellor is “solely and fiercely focused on the challenges facing the country”.
“I’ve known the Chancellor well for 15 years now, and I can tell you that she is solely and fiercely focused on the challenges facing the country and doing what is in the best interests of the country.
“She’s never been shy of facing people down in order to do that in opposition and in government, and over the course of the last few weeks, obviously, I’ve had some discussions with her and her team about measures in the Budget that may affect my department, proposals that we’re making, and discussions that ordinarily happen across government, and in every one of those discussions, it’s been the public interest that she’s completely focused on.”
A Treasury spokesman said: “We do not comment on speculation around changes to tax outside of fiscal events. The Chancellor will deliver a Budget that takes the fair choices to build strong foundations to secure Britain’s future.”