In one of her first moves as Shadow Chancellor of the Exchequer, Rachel Reeves has gone all-in. She has pledged not to increase income tax rates in her first full Budget – on 26 November. This decision comes on the heels of increasing pressure, especially from party stakeholders, that such an action would only push away voters and Labour party members themselves. Reeves hasn’t definitively ruled out tax hikes. She hasn’t ruled it out either, leading to a wave of speculation about her fiscal plans.
In a pre-Budget speech, Reeves stressed the need to make both “tough decisions.” He was direct as to how everyone—including the Council—would have to “chip in.” She also recommended changes in tax policy. This was against the backdrop of her very public financial deficit made public with a £20 billion black hole.
Reeves and PM Rishi Sunak took flak from their own constituents, as well as party members. In response, they announced that they would be pulling the income tax increase. An increase in any tax rates would have gone against Labour’s own election manifesto pledge, making the stakes even higher for both leaders. When it came time for the Chancellor – and eventually, the Prime Minister – to allay that pressure, they refused to raise income tax.
“What I can tell you is as somebody who sits around that cabinet table, who has discussions with Rachel and has known her for a long time, is that she won’t play fast and loose with people’s money.” – Lisa Nandy
The current fiscal landscape presents additional challenges. The yield on the benchmark 10-year government bond increased by 11 basis points. This jump is indicative of investor means to panic in conquer of aunt of tie increase hearsay. UK government bonds and the value of the pound are in free-fall. Sterling is down 0.3% at $1.313.
Lucy Powell, a senior Labour character, underscored one of the challenges facing Reeves — conceiving novel means to raise revenue. This is important for her to be able to adhere to her self-imposed debt and borrowing limits. These fiscal constraints are significant as the party works to balance its costly promises without turning to higher taxes.
“It is really important we stand by the promises that we were elected on and that we do what we said we would do.” – Lucy Powell
There has been valid criticism from both inside and outside the party about the government’s fiscal direction. Kemi Badenoch, a prominent Conservative figure, remarked that “one retreat doesn’t fix a Budget built on broken promises.” She urged that Reeves ensure that no federal taxes would burden employees, employers, residences, or retirement plans. Simultaneously, she advocated for the removal of stamp duty.
“One retreat doesn’t fix a Budget built on broken promises.” – Kemi Badenoch
Daisy Cooper of the Liberal Democrats noted that if the reported U-turn holds true, it may provide relief for families facing financial strain in what could be a challenging Budget. This unease speaks to a larger desire for economic security as the public’s expectations continue to be sky high.
“If true, this 11th hour screeching U-turn might just spare struggling families from yet another punch in the stomach Budget.” – Daisy Cooper