Why did Labour abandon plans to raise income tax in the budget?

"There were always two camps in the internal government debate over what to do at this month's budget, one of the most consequential in recent history. One set of advisers believed that given the scale of the fiscal challenge facing the chancellor, she should do what no chancellor has done in 50 years and put up income taxes. The other worried that breaking a key manifesto pledge would be political suicide."

"For weeks, Reeves has appeared to side with the first camp, delivering speeches warning of difficult choices to come and telling a BBC interviewer that keeping her manifesto promises would mean cutting spending. Then on Wednesday, all that changed. With the prime minister facing a political backlash following a botched attempt by aides to shore up his leadership, he and the chancellor agreed that the planned income tax rise should not go ahead."

"Government insiders say the dramatic U-turn was taken after official forecasts showed the government's black hole was closer to 20bn than 30bn, allowing the chancellor to take a less politically risky path. Some officials say, however, that the forecasts did not change drastically in the last week and that the last-minute change of approach was motivated by a desire not to exacerbate the sense of political turmoil surrounding the government."

Two distinct advisory camps emerged during budget planning: one urging an income tax rise to address a large fiscal shortfall, the other fearing that breaking a manifesto pledge would be politically disastrous and urging alternative tax measures. The chancellor initially signalled willingness to raise income tax and warned spending cuts might follow to keep promises. A last-minute U-turn halted the income tax rise after forecasts indicated the shortfall was nearer £20bn than £30bn, though some officials say forecasts barely changed and the reversal aimed to avoid worsening political instability. Ministers considered multiple tax options while the OBR prepared downgrades that left a substantial gap.

Read at www.theguardian.com