In a dramatic political reversal, Chancellor Rachel Reeves has abandoned her plan to break a key Labour manifesto commitment by raising income tax in the forthcoming Budget.
A Bombshell Change of Course
According to a report from the Financial Times, Downing Street has performed a significant U-turn, deciding against increasing income tax. This shift comes after weeks of preparation by the Chancellor, who had publicly paved the way for potential tax rises. In a pre-Budget speech and during radio interviews, Ms Reeves had consistently argued that the dire state of public finances might necessitate breaking the party's flagship pledge not to raise income tax, National Insurance, or VAT.
As recently as Monday, the Chancellor insisted that no final decisions had been made on tax and spending, with the Budget due on November 26. However, on the same day, she strongly hinted that tax hikes were imminent, stating it would not be possible to adhere to the manifesto promises without implementing "deep cuts" to public spending.
Weeks of Buildup and Sudden Retreat
The Chancellor's recent rhetoric had set a clear expectation for difficult fiscal choices. Last Tuesday, in an unusual pre-Budget speech delivered in Downing Street, Ms Reeves declared she had to "face the world as it is, not the world I want it to be." She vowed to put the country first, even if it meant making unpopular decisions that could cost the party at the next election.
She further elaborated in an interview with BBC 5 Live, explaining that sticking to the manifesto commitments would require slashing capital spending on crucial infrastructure projects, a move she argued would harm the UK's productivity and growth.
Internal Pressure and Political Turmoil
This dramatic policy reversal occurs against a backdrop of internal Labour Party strife. The government has faced a rocky few days after reports emerged of a potential leadership challenge, causing significant tension within party ranks. This internal pressure appears to have been a key factor in forcing the Chancellor's hand, leading to the abandonment of the proposed income tax increase.
While the Treasury remains tight-lipped on the final details of the Budget, other ministers have echoed the need for fair choices. Culture Secretary Lisa Nandy, speaking to Times Radio, refused to be drawn on specifics but stated the government was focused on making the "fairest possible choices" and ensuring "those with the broadest shoulders bear the greatest burden."
All eyes are now on November 26, when Chancellor Reeves will deliver her Budget, which is expected to outline the government's new fiscal strategy without the controversial income tax rise.
