Rachel Reeves considering ‘more than a hundred tax and spending plans’ ahead of Budget
The Chancellor is reportedly considering more than a hundred different tax and spending measures in the upcoming Budget, amid concerns the fiscal watchdog could be about to dent the UK’s productivity performance.
Rachel Reeves is thought to be planning to break into the top third of earners as part of a bid to plug a black hole of up to £50bn in the public finances.
The Office for Budget Responsibility (OBR), which delivered its latest forecasts for the economy to the chancellor last week, is expected to reduce the UK’s productivity performance in the budget amid concerns it could represent an additional £20bn shortfall in the public finances.
Sources told Times Nearly a hundred tax and spending measures are on the table for the budget, including an increase in income tax, which would be a clear breach of Labour’s manifesto promise not to increase three key taxes on workers.
But they said there was still “significant uncertainty” about the level of tax increases needed to fill the looming black hole.
“Nothing can and will be decided until we know exactly what the forecasts are,” the source said.
Meanwhile, Sky News reported that Treasury officials are trying to protect the incomes of two-thirds of income earners, those earning less than £45,000.
The latest reports come after the prime minister refused to say on Wednesday that Labor would stand by its manifesto pledge not to increase VAT, income tax or national insurance in next month’s budget.
Sir Keir Starmer has previously said Labour’s commitment to voters ahead of the 2024 general election is “valid”, but he failed to repeat that assurance in the House of Commons and his press secretary avoided using the phrase.
The Prime Minister also ruled out extending the freeze on the personal tax credit threshold, which would force more earners to pay income tax.
Meanwhile, on Sunday Cabinet Secretary John Healey warned there would be “consequences” to recent poor economic forecasts in this month’s Budget and refused to repeat Labor’s words on tax.
He said the OBR now saw a much worse “scar” on the economy than previously thought and that the Chancellor would “make announcements to deal with these challenges”.
Asked whether the government would stick to its manifesto commitment not to increase income tax, national insurance or VAT, Mr Healey refused to repeat his pledge.
He told Sky News’ Sunday Morning with Trevor Phillips: “That’s for the Budget and that’s something the Chancellor will announce at the end of the month.”
Explaining further about Labour’s tax commitment, he added: “No decisions have been made on the budget, not even the Office for Budget Responsibility has released its final figures.
“But what we do know is that they are now seeing the deep damage and scarring as much more serious than previously thought, a combination of years of disruption, Covid and 14 years of really slow economic growth.
“So there are consequences. Things are changing and we will make the necessary announcements to deal with these challenges in the Budget.”
