Rachel Reeves has reportedly informed the Budget watchdog of her intention to raise income tax in her statement on November 26. The Chancellor has signaled her plans by notifying the Office for Budget Responsibility that an increase in personal taxation is a key measure under consideration.
According to reports from The Times, Reeves is contemplating a 2p increase in income tax along with a 2p reduction in national insurance. This move is seen as an effort to shift the tax burden from workers to other sectors like pensioners and landlords.
Under the proposed plan, the cut in national insurance would apply only to individuals earning below £50,270, reducing the rate from 8% to 6%. Those earning above this threshold would not benefit from the reduction.
Although Reeves’s plans are not yet confirmed and may change, the submission to the OBR indicates a strong likelihood of breaking the manifesto pledge not to raise income tax. The OBR is expected to provide an assessment of the potential impact of such a tax hike in the coming week.
Deputy Labour leader Lucy Powell, who succeeded Angela Rayner, cautioned Reeves against deviating from Labour’s manifesto commitments, which include a promise not to increase income tax.
In response to Powell’s remarks, Housing Secretary Steve Reed refrained from commenting on specific Budget measures but emphasized that Labour is committed to fulfilling its manifesto pledges. Reed highlighted the government’s investments in healthcare and wage increases for low-paid workers as part of their manifesto promises.
The Chancellor recently stated that tough decisions would be necessary in the Budget to prioritize reducing NHS waiting lists, lowering the cost of living, and addressing national debt. Reeves emphasized the need for collective effort in facing the current economic challenges and stressed the importance of aligning actions with the reality of the situation.
Powell reiterated the significance of upholding manifesto commitments, emphasizing the need for trust in politics to ensure public support. She underscored the Labour government’s focus on improving the financial well-being of working-class individuals through manifesto-driven initiatives.
An HM Treasury spokesperson outlined that the Budget would address global economic challenges, focusing on key priorities such as reducing waiting lists, cutting national debt, and easing the cost of living to secure Britain’s future.
