Wubi News

What's behind Rachel Reeves's 'hokey cokey' on income tax rises?

2025-11-15 07:00:02
Rachel Reeves had heavily hinted at breaking manifesto pledges on income tax rises, but is now looking elsewhere to raise revenue

But this week's developments, including the dropping of other kites being flown - from extra tax on partnerships, and entrepreneurs leaving the UK - injected doubt about the appetite to trade political pain for lower bond yields.

Even when it was confirmed that better - or less bad - economic forecasts had helped reduce the budget gap, and create room to avoid the tax rate hike, the markets only calmed briefly, before they crept up to even higher effective rates by the end of the day. The jitters are back.

Insiders said that the chancellor's Budget strategy "remains the same" to increase the buffer or "headroom" on meeting her borrowing rules significantly higher from the current £10bn a year, to tackle cost of living pressures, and to make "fair choices" on tax.

That would appear to mean an extension in the £40bn a year freeze on tax thresholds - which raises an extra £8bn a year as more worker's salaries creep into the higher tax brackets .

Ministers point to how they are planning to raise tax, as well as the amount, suggesting a squeeze on wealth, capital and income from those sources, rather than long-suffering pay packets.

There are real questions about the loose lips around Whitehall, floating all sorts of significant tax reform, and the impact in markets.

It's worth noting too that final decisions on the Budget have not yet been made, and the process continues. everyone will hope it is smoother from here until the big speech on November 26 .