Rachel Reeves ‘plans to raise income tax’ in Budget
Rachel Reeves has reportedly told the Office for Budget Responsibility (OBR) that she plans to increase income tax in her upcoming Budget.
The Chancellor told the watchdog that the increase in personal tax was one of several “significant measures” planned for the Budget at the end of the month. Times.
He is said to be considering a 2p increase in income tax and a 2p cut in national insurance, which would take the burden off workers and shift it to other groups such as homeowners and pensioners.
The national insurance cut may be limited to people earning under £50,270 a year, while earnings above the threshold will still be subject to a two per cent rate, the newspaper reported.
The OBR will prepare an impact assessment of its proposals to be presented to the Treasury on Monday ahead of the Budget on 26 November.
The proposals submitted to the OBR are non-binding but indicate the government plans to break its manifesto pledge not to increase income tax.
Such a move could generate as much as £6bn to help repair the public finances, according to the report. Solution Foundation Think tank that supports the ‘two up, two down’ package.
The trust assessed it would need to seek tax increases of at least £20bn a year by 2029-30 to comply with the chancellor’s fiscal rules.
Speaking about the same reported plans, AJ Bell assessed that the hardest hit will be retirees.
They found that under the proposal, the tax bill of a person receiving a £35,000 pension would rise by almost £450.
Some self-employed people who pay income tax but not national insurance will also be affected.
Scott Gallacher, director of Rowley Turton, said: FT Advisor While the impact on homeowners has garnered little public sympathy, the outrage over the cancellation of the winter fuel discount “suggests that granny is off-limits for the British public”.
In his speech on Tuesday, Reeves signaled that he might break his promise to put “national interests” ahead of “political interests.”
Asked whether he was willing to raise income tax, he said without apparent approval: “If you’re asking which comes first, the national interest or the political interest, for me it’s always the national interest and the same goes for Keir Starmer.”
He also signaled that the government may increase spending to offset rising energy costs.
“In making decisions on both tax and spending, I will do what is necessary to protect families from high inflation and interest rates, protect our public services from a return to austerity, and ensure that the economy we pass on to future generations is secure,” he said.
Raising income taxes could help repair a £30bn deficit in Britain’s public finances, but it could come at a political cost.
The Institute for Fiscal Studies estimated in October that the chancellor would need to find £22bn to balance the government’s finances.
They concluded that the government would “almost certainly” have to raise taxes to cover the deficit.
The OBR, whose forecasts guide government budgets, is also expected to cut productivity trends by 0.3 per cent, worth £20bn.
