Rachel Reeves is reportedly discussing a potential increase in income tax in her upcoming statement on November 26, as per sources. The Chancellor has signaled to the Office for Budget Responsibility (OBR) that raising personal taxation is among the significant tax measures under consideration.
Reports suggest that Reeves is contemplating a 2p rise in income tax along with a 2p reduction in national insurance, aiming to shift the tax burden away from workers to other groups like pensioners and landlords. The proposed national insurance cut would solely benefit individuals earning below £50,270, with the rate dropping from 8% to 6%, while those earning above this threshold would not receive a reduction.
Although Reeves’s plans are not finalized and could change, her communication with the OBR indicates a potential deviation from the manifesto promise of not increasing income tax. The OBR is expected to provide an assessment of the impact of such a tax hike shortly.
Following these developments, Labour’s Deputy Leader Lucy Powell, succeeding Angela Rayner, cautioned Reeves against breaking the party’s manifesto commitments, including the pledge regarding income tax. When questioned about Powell’s remarks, Housing Secretary Steve Reed refrained from commenting on specific Budget measures but emphasized Labour’s commitment to fulfilling its manifesto pledges.
Reed highlighted achievements such as increased NHS investments, additional appointments, and raising the national minimum wage as part of honoring the manifesto promises. The government’s focus remains on delivering the commitments outlined in the manifesto throughout this parliamentary term.