Reeves accused of ‘rattling the markets’ after income tax U-turn pushes up borrowing costs – UK politics live | Politics
important events
This from Kevin Schofield This morning from HuffPost UK.
Senior Labor source: “Keir and Rachel – in office but not in power.”
one this morning treasury spokesman He issued this statement in response to reports that Rachel Reeves has abandoned plans to increase income tax in the budget.
We do not comment on speculation regarding tax changes other than financial events. The Chancellor will deliver a budget that delivers fair choices to create strong foundations to secure Britain’s future.
Alex Wickham Bloomberg’s Rachel Reeves is reporting that she has dropped a plan to raise income taxes in the budget after fiscal forecasts improved. HE says:
Rachel Reeves received an improved fiscal forecast from the budget watchdog that put the fiscal deficit at £20bn, people familiar with the matter said, prompting her to abandon plans to increase income tax rates.
The Office for Budget Responsibility’s latest update moved in a significantly better direction, driven by the strength of revenues and wage performance.
As well as filling the £20bn gap, Reeves is expected to leave a gap of between £15bn and £20bn in breach of fiscal rules.
Sources said the productivity drop expected from the OBR had been partially covered.
Wickham also said that based on briefings he was given, Reeves “will likely lower the income tax thresholds in the budget.” [see 8.57am] and raise significant taxes on salary sacrifice schemes”.
The Treasury has now triggered speculation it will be forced to lower the threshold at which people start paying higher rates to compensate for not raising the basic income tax rate.
Inside his story Financial Times says:
The Chancellor is now exploring alternative ways to fill the fiscal gap, estimated by economists to be up to £30bn.
One option to raise revenue involves lowering the thresholds at which people pay income tax at different rates, but leaving the basic and higher tax rates at the headlines.
Reeves was photographed leaving Downing Street earlier this month with his diary on display and a single word written about a meeting: “Thresholds.”
Rachel Reeves and Keir Starmer were nervous about raising the main rate of income tax because it would be a direct breach of the Labor Party manifesto; he said:
Labor will not increase taxes on employees; We will therefore not increase national insurance, basic, higher or additional income tax rates or VAT.
But Labor has already increased employer national insurance, which is seen by many as a breach of this commitment. Reeves is expected to extend the freeze on income tax thresholds, which will increase the amount of income tax people pay, but if the manifesto is understood to refer only to headline rates, this is technically not a breach of the manifesto.
Lowering the thresholds would also be seen as a violation of the spirit, if not the letter, of the manifesto.
SNP says Labor acts as if it has ‘completely lost control’ and Starmer is about to leave
StephenFlynnThe SNP leader in Westminster says the latest news on the budget shows the government is in chaos. In a statement this morning, he said:
This is not government, this is chaos.
Labor gives the impression of a party completely out of control, playing a dangerous game with the public’s finances so that the prime minister can cling to power.
But now everyone knows the clock is ticking until he is kicked out of Downing Street. His final act should not be to play fast and loose with public finances; They have already paid a heavy price for the constant chaos and crisis that passes for politics at Westminster.
Liberal Democrats have welcomed reports of a “U-turn” on income tax and called on Reeves to tax banks more
This from Daisy CooperThe Liberal Democrat Treasury spokesman and deputy leader announced a U-turn on budget income tax.
If true, this 11th-hour u-turn could save struggling families from taking another hit to the budget.
The Chancellor must look at our plan to impose a windfall tax on billions of profits of big banks and put £270 back into people’s pockets.
Good morning. last week on monday Rachel ReevesThe Chancellor made a speech implying that he would not keep his manifesto promise and would almost certainly increase the main income tax rate in the budget. Government officials made no attempt to oppose the idea, and in some briefings the decision “nailed”.
But it wasn’t. There was a U-turn. The news was published by the Financial Times last night. a story He said Reeves and Keir Starmer had “abandoned their manifesto-busting plans to increase income tax rates in a dramatic U-turn ahead of the budget”. The Guardian was quickly able to confirm the story and here is our report: Jessica Elgot, Pippa Crerar And Peter Walker.
As the story explains, a U-turn on this scale can be difficult to explain.
Downing Street and the Treasury, together with Labor MPs, have been preparing the ground for the breach of the manifesto for weeks. In particular, it was emphasized to Labor Party MPs that they should not speak against the budget due to the impact that possible measures could have on bond markets and the UK’s borrowing costs.
That message to MPs is likely to ring hollow if the chancellor returns to the U after days of infighting over a potential challenge to the prime minister’s leadership and attention to briefings for health secretary Wes Streeting.
All of this comes less than two weeks before the budget, which takes place on Wednesday, November 26.
Here are the important developments regarding this news this morning.
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Culture secretary Lisa Nandy did not deny the FT report. But in an interview with Sky News he rejected suggestions that the reported U-turn made the government look chaotic.
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Conservative Party leader Kemi Badenoch has welcomed reports that a proposed increase in income tax has been scrapped. By commenting on the link to FT’s news on social media, he said:
Good morning my baby. (If true).
Only the Conservatives fought against Labour’s plans to raise taxes. But a single withdrawal will not fix a Budget based on broken promises. Reeves should ensure there will be no new taxes on business, business, homes or pensions, and go further by abolishing stamp duty.
We’re experiencing some movement in the market as investors digest the change in income tax plans ahead of Rachel Reeves’ fall budget.
Return in the bond market, 30 years of England’s gilding like that 12 basis points increase, It suggests that there is an increased perception of risk to the financial position.
yield on 20 years gildedMeanwhile, it was sitting at 5.225%. plus 12 basis points increase that day
Reuters says this is shaping up to be the worst day of a long rally since July 2, when Reeves’ tearful appearance in parliament spooked investors.
Where is this from Faisal IslamBBC economics editor.
Kalyeena has more information on this subject.
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And in response, the Conservative Party accused Reeves of “shattering the markets.” This from Kevin HollinrakeTory seat.
What Rachel Reeves can’t understand is this constant “will she or won’t she?” briefing shook the markets and eroded the confidence of the business world.
It’s bad for growth, bad for investment and bad for employment.
The country is paying the price for this indecision.
Here is the agenda of the day.
9am: Health minister Wes Streeting joins LBC on the call.
10am: Colleagues begin committee stage debate on assisted dying bill.
11.30: A lobby briefing is being held in Downing Street.
Morning: Kemi Badenoch visits Essex.
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