Sir Keir Starmer has refused to rule out a freeze on income tax thresholds in next week’s Budget, as Labour struggles to address a multibillion-pound shortfall in public finances. The Prime Minister faced questioning from Conservative leader Kemi Badenoch at Prime Minister's Questions, who accused him of breaking manifesto promises.
When asked directly whether he would maintain the freeze on the point at which the higher rate of tax applies—a policy known as fiscal drag—Starmer did not give a definitive answer. He said: 'The Budget is one week today and we will lay out our plans then.'
Ms Badenoch criticised the government for causing 'real anxiety', claiming that people are not buying houses and businesses are cancelling investment decisions due to uncertainty. A Conservative Party spokesperson later said the Chancellor Rachel Reeves had previously stated that freezing thresholds would be a breach of the Labour manifesto and would hurt working people.
Leading economists have warned that continuing the freeze could be seen as a broken promise and may not calm financial markets. Stephen Millard, deputy director for macroeconomics at the National Institute of Economic and Social Research, told The Independent that while the move would raise revenue and widen the tax base, it could hit middle-income households and fail to reassure markets as it is a pledge about future taxes.
