Rachel Reeves ‘set to ditch plan to raise income tax’ in Budget

Rachel Reeves has reportedly abandoned plans to break Labor’s manifesto pledge and raise income tax in this month’s budget.

The chancellor was expected to raise income tax in the face of a widening gap in spending plans and signaled on Monday that the alternative could be “deep cuts” to public investment.

But Finance Times He stated that he had now abandoned these plans for fear that they might anger both voters and Labor Party MPs.

The decision was forwarded to the Office for Budget Responsibility (OBR) on Wednesday, when the Chancellor presented a list of “key measures” to be included in his Budget on 26 November, according to the newspaper.

An income tax increase would help plug a fiscal black hole estimated by some economists to be as much as £50bn, but would also break Labour’s clear manifesto commitment not to increase income tax, national insurance or VAT.

The prospect of a manifesto breach sparked criticism from Labor’s new deputy leader, Lucy Powell, earlier this month, who said it would damage “confidence in politics”.

The chancellor, who has vowed not to return to “austerity” through deeper spending cuts, may now have to rely on a wider range of smaller tax increases if he is to stick to his own rules on debt and borrowing.

Finance Times He suggested one option could be to lower income tax thresholds while keeping tax rates the same, which could save the Treasury billions of pounds.

Ms Reeves kicked off November with a speech in which she failed to rule out an income tax rise, despite previously saying Labor would stick to its manifesto commitments.

Sticking to those commitments would require things like “deep cuts to capital spending” that could harm productivity growth, he told the BBC on Monday.