Chancellor Rachel Reeves has abandoned plans to raise income tax rates in the upcoming budget, marking a significant U-turn for the Labour government. The decision, reportedly backed by Prime Minister Keir Starmer, comes after days of internal party turmoil and briefing wars.
The reversal was communicated to the Office for Budget Responsibility on Wednesday, according to sources. Downing Street declined to comment on the reports but did not deny them. Reeves had previously indicated she might break Labour's manifesto pledge not to raise taxes on working people, but has now scrapped those plans.
Instead, the chancellor is expected to rely on smaller tax-raising measures to fill a multibillion-pound fiscal hole, including higher levies on gambling and extending a freeze on personal tax thresholds. Critics argue that freezing thresholds amounts to a stealth tax rise.
The U-turn follows a period of intense speculation about Starmer's leadership, with some allies suggesting Health Secretary Wes Streeting could mount a challenge—a claim Streeting has denied. The government's efforts to shore up Starmer's position have backfired, with Labour MPs and ministers expressing astonishment at the admission of vulnerability.
Reeves had previously refused to rule out income tax rises during a Downing Street press conference, stating she had to "face the world as it is." The Treasury had been preparing Labour MPs for a potential breach of the manifesto, but many remained alarmed at the impact on constituents.
