Reeves backs away from income tax rates rise after improved economic forecasts

"Faisal Islam,Economics editor, Chris Mason,Political editor and Kate Whannel,Political reporter Getty Images Rachel Reeves has decided against raising income tax rates at the Budget after receiving better-than-expected economic forecasts, government sources have said. In recent weeks, the chancellor had given strong indications she would increase the tax - a move that would have broken Labour's election promise not to raise "the basic, higher or additional rates of income tax"."

"A proposal to increase income tax rates by 2p, while cutting National Insurance by the same amount, was sent to the OBR as an option earlier this month to be costed, to help fill what was then a 30bn gap in the public finances, mainly caused by a downgrade to productivity. Newer assessments from the OBR appear to have increased the projected strength of wages and tax receipts in the coming years and offset several billion pounds of that gap, taking it closer to 20bn."

Rachel Reeves has decided not to raise income tax rates at the Budget after receiving better-than-expected forecasts from the Office for Budget Responsibility. The chancellor had previously considered a 2p rise in income tax offset by a National Insurance cut to fill a then-estimated £30bn fiscal gap. New OBR assessments have strengthened projected wages and tax receipts, reducing that gap closer to £20bn. The government may instead freeze or lower income tax thresholds or adjust other taxes. Many Labour MPs were nervous about breaking an election pledge, and ministers say tough choices remain necessary.

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