Rachel Reeves is reportedly considering increasing income tax in her upcoming statement on November 26, according to sources familiar with the matter. The Chancellor has allegedly informed the Office for Budget Responsibility (OBR) that a rise in personal taxation is among the significant measures under consideration.
Reports suggest that Reeves is contemplating a 2p rise in income tax coupled with a 2p reduction in national insurance, as per information from The Times. This potential move aims to shift the tax burden away from workers onto other segments like pensioners and landlords.
Under the proposed plan, the national insurance cut would apply solely to individuals earning below £50,270, reducing the rate from 8% to 6%. Those earning above this threshold would not benefit from the reduction.
While Reeves’s plans remain unconfirmed and subject to change, the submission to the OBR indicates a departure from the pledge 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.
Deputy Labour leader Lucy Powell, who recently succeeded Angela Rayner, cautioned Reeves against breaking the party’s manifesto commitments, including the promise regarding income tax hikes.
In response to Powell’s remarks, Housing Secretary Steve Reed refrained from commenting on specific Budget measures but emphasized Labour’s dedication to fulfilling its manifesto pledges. Reed highlighted past accomplishments aligned with the manifesto, such as increased NHS investments and raising the national minimum wage.
The Chancellor recently hinted at potential tax hikes in a pre-Budget address, emphasizing the necessity of making tough decisions to address key national priorities like reducing waiting lists, lowering the cost of living, and managing national debt.
Powell stressed the importance of upholding manifesto promises to maintain public trust in politics and ensure that ordinary working individuals benefit from the government’s actions. She reiterated the commitment to boosting the income of regular workers and affirmed that the Budget would align with these objectives.
A spokesperson from HM Treasury reiterated the Chancellor’s focus on addressing economic challenges and meeting the needs of the British public through measures like reducing waiting lists, national debt, and the cost of living.
