Starmer refuses to rule out freeze on income tax thresholds in Budget
Sir Keir Starmer has refused to rule out freezing income tax thresholds in next week’s Budget as Labor looks to plug a multi-billion pound black hole in the country’s finances.
While the government has tried to find the money from other sources, the prime minister has not ruled out forcing many people to pay more by continuing to freeze the point at which a higher rate would come into play (the so-called fiscal drift).
Leading economists have warned that the move, in which the government could be accused of failing to deliver on manifesto promises, could cause further problems as it “may not calm markets”.
The refusal to rule out a freeze comes after chancellor Rachel Reeves U-turned plans for a wider rise in income tax last week, spooking markets.
Ms Reeves was warned that the combination of higher borrowing, slow economic growth and Labor U-turns meant she would have to raise taxes or scrap flagship borrowing rules in the Budget.
Sir Keir was taken on by Tory leader Kemi Badenoch at Prime Minister’s Questions about tax thresholds, saying freezing them would be a breach of Labour’s manifesto.
He asked her: “This is the first Budget to come out before it has even been delivered. I fear the Chancellor’s ignorance is now damaging the economy. The Prime Minister needs to put an end to this mess. So can he confirm today that he will break another promise by freezing income tax thresholds?”
Responding, Sir Keir said: “The budget is a week today and we will set out our plans then.”
The Conservative leader lashed out, accusing the government of Budget chaos, which he said was “causing real concern. People aren’t buying homes, businesses aren’t hiring and they’re canceling investment decisions.”
A Conservative Party spokesman later said: “The Prime Minister has failed to repeat the promise made by the chancellor in last year’s budget to end the freeze on income tax thresholds.
“Rachel Reeves said any freeze on thresholds would be a breach of the Labor manifesto and would ‘hurt working people’. If she does not end the budget freeze next week it will be yet another broken promise from a government that has lost the trust of the British people.”
Stephen Millard, deputy director of macroeconomics at the National Institute for Economic and Social Research, said: Independent The positives of such a move would include that it would “raise revenue, albeit in parliament later rather than now, and would broaden the tax base, thus eliminating to some extent the need for an increase in the basic rate”.
But he said any freeze could break the party’s manifesto pledge and hit middle-income households, who would have to pay higher rates of tax in future.
“And given that there is a promise of future taxes that can always be rolled back rather than raising taxes today, it may not calm markets,” he warned.
