Starmer and Reeves Ditch Plans to Raise Income Tax in Budget 2025
Less than two weeks before the 26 November Budget 2025, Starmer and Reeves have abandoned plans to raise income tax, marking a manifesto-breaking U-turn. The decision, reportedly supported by Downing Street due to concerns about backlash from MPs and voters, saw earlier proposals for a potential 2p rise in the basic rate of income tax and National Insurance cuts for basic-rate earners shelved.
The government now intends to address an approximately £30bn shortfall with narrower tax-raising measures, including freezing income tax thresholds for an additional two years beyond 2028, expected to raise about £8bn. This shift follows a leadership crisis and internal briefing issues, during which the Prime Minister apologized to Wes Streeting amid worsening party mood. Aides warned that manifesto-breaking tax rises were too risky.
It remains uncertain whether other fiscal actions, such as adjustments to the two-child benefit cap, will proceed following this U-turn. Meanwhile, Conservative leader Kemi Badenoch claimed that Labour had fought off tax-raising plans and urged Reeves to guarantee no new taxes on work, businesses, homes, or pensions, and to abolish stamp duty.
