Rachel Reeves has reportedly informed the Budget watchdog of her intention to raise income tax in her upcoming statement on November 26. The Chancellor is alleged to have signaled her plans to the Office for Budget Responsibility (OBR), indicating that a rise in personal taxation is among the significant tax measures under consideration.
According to reports from The Times, Reeves is contemplating a 2p increase in income tax alongside a 2p reduction in national insurance. This move seems to aim at shifting the tax burden away from workers onto other sectors like pensioners and landlords. The proposed cut in national insurance would apply solely to individuals earning below £50,270, with the rate decreasing from 8% to 6%. Those with higher incomes exceeding £50,270 would not benefit from the reduction.
While Reeves’s plans are not yet final, the submission to the OBR signifies a strong indication of her willingness to deviate from the manifesto promise of not raising income tax. The OBR is expected to provide an assessment of the potential impact of such a tax increase in the coming week.
Lucy Powell, Deputy Leader of the Labour Party, who replaced Angela Rayner, cautioned Reeves against reneging on Labour’s manifesto commitments, including the pledge on income tax hikes. Housing Secretary Steve Reed refrained from commenting on specific Budget measures but emphasized Labour’s commitment to fulfilling its manifesto pledges during an interview with Sky News.
Reeves recently declined to uphold Labour’s pre-election vow of no increases in income tax, VAT, or national insurance, acknowledging the necessity of making tough decisions in the Budget to prioritize addressing NHS waiting lists, reducing living costs, and tackling national debt. In a pre-Budget address from Downing Street, she hinted at potential tax hikes, stressing the collective responsibility of citizens in navigating the current economic challenges.
Powell reiterated the importance of maintaining trust in politics by honoring manifesto commitments that aim to benefit ordinary working people. She emphasized the government’s goal of enhancing the financial well-being of the public through budgetary measures aligned with Labour’s manifesto objectives.
A spokesperson from HM Treasury outlined the Budget’s focus on addressing global economic challenges, reinforcing Britain’s future prospects, and responding to key priorities such as reducing waiting lists, national debt, and living expenses.