Chancellor rows back on income tax increase

The Chancellor has abandoned plans to hike income tax at the Budget because of improved economic forecasting.

- 

Rachel Reeves had been expected to hike income tax in the face of a yawning gap in her spending plans, hinting as recently as Monday that the alternative would be “deep cuts” to public investment.

But it is now claimed she has abandoned introducing an income tax rise at the November 26 Budget over fears it could anger both voters and backbench Labour MPs.

The PA news agency understands the strength of tax receipts has improved forecasting from the Office for Budget Responsibility, allowing for the U-turn. This is particularly the case on stronger wage performance: the higher wages are, the more tax is paid on them. A downgrade in productivity has also not been as bad as was first feared.