Rachel Reeves reportedly informed the Budget watchdog of her intention to raise income tax in her statement on November 26. The Chancellor is believed to have informed the Office for Budget Responsibility (OBR) that an increase in personal taxation is among the significant tax measures she is contemplating announcing.
According to reports, Reeves is considering a 2p increase in income tax and a 2p reduction in national insurance, aiming to shift the tax burden away from workers onto other groups like pensioners and landlords. The proposed national insurance cut would apply only to individuals earning less than £50,270, reducing the rate from 8% to 6%, while those earning more than £50,270 would not benefit from the cut.
While Reeves’s plans are not finalized and subject to change, submitting them to the OBR signals her intention to potentially deviate from the manifesto commitment not to raise income tax. The OBR is expected to provide an assessment of the impact of such a tax increase in the coming week.
Labour Deputy Leader Lucy Powell, succeeding Angela Rayner, cautioned Reeves against breaking Labour’s manifesto promises regarding tax hikes. When questioned about Powell’s remarks, Housing Secretary Steve Reed refrained from commenting on specific budget measures but emphasized that Labour was committed to fulfilling its manifesto pledges.
Reeves, in a recent speech, acknowledged the need to make tough decisions in the Budget to prioritize addressing NHS waiting lists, reducing the cost of living, and lowering national debt. While the plans are still under review and subject to adjustments, the Chancellor’s indication of potential tax hikes has raised concerns within the Labour party about adhering to their manifesto commitments.
In response to the ongoing discussions, an HM Treasury spokesperson emphasized the Chancellor’s focus on addressing global economic challenges and meeting the priorities of the British public, including reducing waiting lists, national debt, and the cost of living.
