Chancellor Rachel Reeves is considering a 2p rise in the basic rate of income tax, a move that would break Labour’s election manifesto pledge not to increase income tax, National Insurance, or VAT, according to The Telegraph.
Treasury sources suggest the proposal is under active discussion as the government searches for ways to plug a major shortfall in the public finances ahead of next month’s Budget. If implemented, Reeves would become the first Chancellor since the 1970s to raise the basic rate of income tax.
One option reportedly being explored is to cut National Insurance by 2p while increasing income tax by 2p, a plan previously floated by the Resolution Foundation, a left-leaning think tank. The measure would raise around £6 billion, with the burden falling primarily on pensioners and landlords, who do not pay National Insurance.
The speculation intensified after Sir Keir Starmer declined to restate Labour’s 2024 election promise during Prime Minister’s Questions, when challenged by Conservative leader Kemi Badenoch on whether the government would rule out tax rises.
The latest developments are seen as the clearest indication yet that No. 10 and the Treasury may be preparing to depart from Labour’s manifesto commitments in an effort to stabilise the nation’s fiscal position.
