Chancellor declines to rule out income tax hike – reports

Rachel Reeves has declined to rule out raising income tax at next month’s Budget, according to reports.

The Chancellor has previously insisted that Labour’s manifesto commitment not to raise income tax, national insurance or VAT “stands” when questioned about how she will bridge a fiscal black hole in November.

But asked about reports the Treasury was considering an income tax hike, the BBC said Ms Reeves told reporters on Friday she would “continue to support working people by keeping their taxes as low as possible” but was still “going through the process” of writing the Budget.

The Chancellor said: “Although I can’t talk about individual measures at this stage, I understand that the cost of living is still people’s number one concern.”

Ms Reeves is widely expected to use the Budget to increase taxes once again, with the Institute for Fiscal Studies estimating she needs to find £22 billion of tax rises or spending cuts to meet her self-imposed fiscal rule.

The gap comes as a result of higher borrowing costs, weak growth and an expected downgrade to official productivity forecasts, although recent better-than-expected inflation figures have eased the pressure slightly.

Raising the basic rate of income tax by 1p could raise around £8 billion, but would break a clear manifesto pledge.

It would also be the first time the basic rate has been increased since the 1970s.

The Chancellor is also reported to be considering cutting the amount of money people can save in cash Isas as part of a drive to encourage investment in stocks and shares.

It is understood that no decision has yet been made and several options are being considered, including halving the allowance from £20,000 to £10,000.

Treasury minister Lucy Rigby told the Telegraph the Government was “looking at the right balance between cash and shares in the Isa”.

She said: “The bottom line is, we want people to be better off and one way we can do that is to build a shareholding democracy in this country.”

Meanwhile, The Times reported that the Chancellor would use the Budget to increase the minimum wage once again, and make further moves towards abolishing lower minimum wage rates for younger people.