Labour Consideration of Income Tax Increase Raises Concerns
Chancellor Rachel Reeves is reportedly contemplating a 2 pence increase on income tax, a move that would significantly contradict Labour’s manifesto commitments, reports BritPanorama.
This proposed measure aims to generate substantial revenue—estimated at £20 billion—amidst increasing pressure on the government to address a funding shortfall that currently stands at around £30 billion due to a sluggish UK economy.
A senior Labour minister noted, “Income tax could go up – they are looking at 2 pence. It would raise a lot of money.” Implementing this increase would mark a departure from the Labour Party’s previous promises, specifically the commitment not to raise the basic, higher, or additional rates of income tax, as well as National Insurance and VAT, outlined in their manifesto.
Current deliberations come in light of previous criticisms regarding Labour’s adherence to its manifesto. Critics argue that an earlier increase in National Insurance contributions on employers already represents a breach of commitments, though Labour officials assert that as it impacted only employer contributions, the pledge remains intact.
Furthermore, the Treasury is considering rolling back a previously established 5 pence fuel duty cut, originally set as a temporary relief measure during the COVID-19 pandemic. As the Budget date approaches on November 26, final proposals have yet to be formalised.
Economists have cautioned that the UK may face a stagflation crisis driven by weak growth and rising inflation, heightening the urgency for fiscal measures. A Treasury spokesperson reiterated, “The manifesto stands,” while refraining from engaging in Budget speculation.
As the situation unfolds, the implications of such tax policies will likely be significant, affecting not only government revenues but also public trust in Labour’s fiscal strategy.
In a climate marked by economic uncertainty, decisions taken by the Chancellor will play a crucial role in shaping both fiscal policy and Labour’s political credibility moving forward.
