In a dramatic political reversal, Prime Minister Sir Keir Starmer and Chancellor Rachel Reeves have abandoned their controversial plan to break a key manifesto commitment by raising income tax rates in the upcoming budget.
Budget Plans Scrapped Amid Backlash Fears
The decision, first reported by the Financial Times, represents a massive about-turn just less than two weeks before the budget scheduled for 26 November. Downing Street has backed down following concerns about angering both Labour MPs and voters who would be affected by the tax increase.
This policy reversal comes after weeks of groundwork by both the prime minister and chancellor, who had been preparing to make the manifesto-breaking announcement. In a news conference last week, Rachel Reeves had appeared to pave the way for tax rises, speaking of "difficult choices" and insisting she could neither increase borrowing nor cut spending to stabilise the economy.
Political Pressure Forces Change of Heart
The decision to backtrack was formally communicated to the Office for Budget Responsibility on Wednesday in a submission of "major measures". The Treasury and Number 10 have both declined to comment on the development.
Conservative shadow business secretary Andrew Griffith seized on the reversal, stating: "We've had the longest ever run-up to a budget, damaging the economy with uncertainty, and yet - with just days to go - it is clear there is chaos in No 10 and No 11."
The political context of this decision includes:
- Growing discontent among Labour backbenchers
- Concerns about voter reaction to broken promises
- Economic pressure to stabilise public finances
- The challenge of balancing manifesto commitments with economic reality
Implications for the November Budget
This eleventh-hour change leaves significant questions about how the government will now address the economic challenges it faces. The chancellor had previously told the public that "everyone has to play their part" in stabilising the economy, but has now retreated from what would have been one of the most significant revenue-raising measures available.
The U-turn represents one of the first major tests of the Labour government's economic strategy since taking office, demonstrating the tension between electoral promises and governing realities. With the 26 November budget date fast approaching, the government must now find alternative approaches to address the economic pressures it identified without breaking its core manifesto pledge on income tax rates.
