Overview
- At Prime Minister’s Questions on 29 October, Keir Starmer declined to restate Labour’s promise not to raise income tax, National Insurance or VAT ahead of the 26 November Budget.
- Reporting indicates Chancellor Rachel Reeves is exploring options including a 1p–2p increase in income tax, with one discussed package pairing a 2p income tax rise with a 2p cut to National Insurance.
- Analysts say such a swap would leave many workers broadly unchanged while increasing liabilities for people who pay income tax but not NICs, such as many pensioners and some landlords.
- The Office for Budget Responsibility is expected to downgrade trend productivity by about 0.3 percentage points, a shift that outside estimates suggest could worsen the fiscal outlook by roughly £20 billion.
- The Institute for Fiscal Studies estimates around £20–22 billion of tax rises or spending cuts may be needed to restore headroom, as Conservatives escalate attacks and urge that Reeves be sacked if she raises taxes.