Rachel Reeves reportedly informed the Budget watchdog of her intention to raise income tax during her statement on November 26. The Chancellor is believed to have alerted the Office for Budget Responsibility (OBR) about a potential increase in personal taxation as one of the key tax measures under consideration.
Reports suggest that Reeves is contemplating a 2p increase in income tax coupled with a 2p reduction in national insurance, a move aimed at shifting the tax burden away from workers to other sectors such as pensioners and landlords. The proposed national insurance cut would only benefit individuals earning below £50,270, with the rate dropping from 8% to 6%, while those earning more than £50,270 would not receive a reduction.
Although Reeves’s plans are not final and could change, submitting them to the OBR signals a possible divergence from the manifesto promise not to raise income tax. The OBR is expected to provide an assessment of the impact of such tax adjustments in the coming week.
Labour’s Deputy Leader, Lucy Powell, cautioned Reeves against reneging on the party’s manifesto commitments, including the pledge regarding income tax hikes. When questioned about Powell’s remarks, Housing Secretary Steve Reed refrained from discussing specific Budget measures but emphasized Labour’s commitment to fulfilling its manifesto pledges.
Reeves, in a recent address at Downing Street, hinted at potential tax increases, stressing the need for collective contributions to address current challenges. Powell reiterated the importance of honoring manifesto promises to maintain public trust in politics and ensure that working-class individuals benefit from the government’s initiatives.
In response to the ongoing discussions, an HM Treasury spokesperson highlighted the upcoming Budget’s focus on addressing pressing issues like reducing NHS waiting lists, national debt, and the cost of living to secure Britain’s future and meet the needs of its citizens.