UK Chancellor Rachel Reeves faces mounting pressure to break Labour's manifesto pledge and raise income tax in the upcoming Budget on November 26. A major economic think tank has warned of a £50 billion black hole in public finances, calling tax rises the "least bad option" for the economy.
The National Institute of Economic and Social Research advised Reeves to increase the basic income tax rate by 2 pence and the higher rate by 5 pence. This would raise approximately £30 billion. Stephen Millard, the institute's Deputy Director for Macroeconomics, said: «She will likely need to break her manifesto pledge by raising income tax - rather than attempting to fill the gap by messing around with lots of changes to marginal taxes - as this would be the least bad option for the economy.»
If implemented, Reeves would become the first Chancellor in 50 years to raise the basic rate of income tax. Labour's manifesto explicitly promised not to increase income tax, national insurance, or VAT.
Defence and blame
Education Secretary Bridget Phillipson defended the potential tax rises, blaming Brexit and austerity for economic damage. She told the BBC: «the damage of the chaotic Brexit we saw, the damage of years and years of austerity was even more serious than we anticipated»
Phillipson added: «Where it comes to our manifesto, of course, we take the commitments we made seriously. And as the Chancellor was saying yesterday, we know that there are some big challenges in the economy. We've made lots of changes already that are putting things on a more stable footing. That's why we've seen interest rate cuts, we've seen growth being the fastest in the G7 in the first half of the year. But there are some big global factors that remain a challenge, and that's why we will do what's right, what's necessary, both for the public but also for the long-term future of our economy.»
Political backlash
The potential manifesto breach has triggered fierce criticism. An unnamed minister told The Times: «Breaking the manifesto will mean we lose some voters forever.»
Shadow Chancellor Sir Mel Stride called for Reeves' resignation, stating: «This is about choices. If Rachel Reeves breaks her word and raises taxes again, she must go. A responsible chancellor would get a grip on spending - including the welfare bill - not reach for yet another tax rise.»
Reeves refuses to quit
When asked about resignation on LBC's Tonight With Andrew Marr, Reeves invoked financial market stability. She responded: «And what do you think would happen in financial markets if I did that?»
The Chancellor emphasized her determination to continue, stating: «I am not going to walk away because the situation is difficult. I was appointed as chancellor to turn our economy around, and I'm absolutely determined to finish that job.»
In a speech on Tuesday, Reeves warned that «each of us must do our bit» to address the economic challenges ahead.
Note: This article was created with Artificial Intelligence (AI).
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