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Conservative leader Kemi Badenoch has criticized the government’s Budget plans, asserting that the proposals are already falling apart prior to their formal announcement. This critique came after the chancellor opted against increasing income tax rates, a move that ministers had previously signaled despite it contradicting a prior election commitment. Recent economic forecasts, which outperformed expectations, reportedly influenced Rachel Reeves’s decision to abandon the tax hike.
At Prime Minister’s Questions, Badenoch confronted Labour leader Sir Keir Starmer, questioning whether the government would instead freeze income tax thresholds—a policy that could be perceived as breaking another promise. The prime minister did not provide a definitive answer, indicating that the chancellor would present the details in the upcoming Budget scheduled for next week. Badenoch condemned the situation as a “shambles,” accusing the government of teasing a tax rise only to backtrack. She further stated, “The chancellor’s cluelessness, I’m afraid, is damaging the economy now.”
Highlighting past commitments, Badenoch referenced Reeves’s statements from last year’s Budget, where the chancellor assured the public, “I am keeping every single promise on tax that I made in our manifesto,” and promised not to extend the freeze on income tax and National Insurance thresholds because such measures “would hurt working people.” Badenoch challenged the prime minister to confirm that this promise would be upheld, but Starmer evaded a direct response by emphasizing that the Budget would tackle NHS waiting times, national debt, and the cost of living. He stressed Labour’s approach would avoid “austerity” and reckless “borrowing spree” linked to previous Conservative governments.
Looking ahead, Reeves is set to deliver the Budget in the House of Commons on 26 November, with Badenoch providing the official opposition response. Labour’s manifesto for the 2024 general election includes a commitment not to raise taxes on working people, explicitly ruling out increases in National Insurance, income tax rates, or VAT. The existing freeze on income tax thresholds, implemented by the Conservatives in April 2023 and due to expire in 2028, sets the levels at which individuals begin paying tax or higher rates. Although extending the freeze would not directly breach Labour’s manifesto wording, it would result in more people incurring higher tax liabilities as wage increases push them into taxed bands. The Institute for Fiscal Studies estimates that a two-year extension could generate £8.3 billion annually and increase tax exposure for low earners, with someone on minimum wage potentially liable for income tax after working just 18 hours a week.
In the lead-up to the Budget announcement, there had been repeated suggestions from ministers about raising income tax rates. As recently as last week, Reeves mentioned that honouring Labour’s manifesto promises could necessitate “deep cuts in capital spending.” Starmer himself refrained from reiterating previous pledges not to increase key taxes during PMQs in October. However, it emerged last Friday that Reeves had decided against increasing tax rates after new fiscal assessments showed that the shortfall in public finances was approximately £10 billion less than earlier forecasts. The chancellor had submitted various options to the Office for Budget Responsibility (OBR) to evaluate potential fiscal scenarios, including a proposed 2p income tax rate increase offset by an equivalent National Insurance reduction—meant to address a then-estimated £30 billion deficit. Updated OBR evaluations, reflecting stronger wage growth and higher tax revenues, have narrowed the projected gap to around £20 billion. Concerns among Labour MPs about breaking an election promise also appear to have influenced this decision
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