Chancellor Rachel Reeves has ruled out increases to income tax, national insurance, and VAT in the upcoming Budget, despite earlier signals that a rise in income tax might be on the cards. In a statement, she confirmed the government would stick to its manifesto commitments not to raise these three major taxes, even as she seeks to fill a £30bn hole in public finances.
Reeves had previously hinted at possible tax rises, saying she must 'deal with the world as I find it, not as I might wish it to be'. However, she has now explicitly ruled out changes to the basic, higher, or additional rates of income tax, as well as any increases to national insurance or VAT. The decision comes after speculation that a 1p rise in the basic rate could have raised £6.9bn annually.
The government will instead look to other measures to raise revenue, such as closing tax loopholes and increasing taxes on wealth and corporate profits. Reeves emphasised that those with the 'broadest shoulders' would still be asked to contribute more, but not through the main personal taxes.
Experts had warned that even a 1p rise in the basic rate would cost typical earners £224 a year, while higher earners would face even steeper bills. The Resolution Foundation had estimated that a swap of income tax for national insurance could raise £6bn without hitting workers' pay packets, but that option has also been ruled out.
Reeves's firm stance will be welcomed by many households worried about the cost of living, but it leaves a significant gap in the public finances that will need to be addressed through other means.
