Chancellor Rachel Reeves is facing calls to directly explain to voters why extending the freeze on income tax thresholds was the "fairest" approach to raising taxes, as the government faces scrutiny over its first major budget.
The Threshold Freeze Controversy
In Wednesday's budget announcement, Ms Reeves extended the freeze on personal income tax thresholds by three years, continuing a policy originally introduced by the Conservatives in 2021 that was scheduled to expire in 2028. This move, described by critics as a "stealth tax," is projected to generate approximately £8 billion for the exchequer in 2029-2030 by pulling around 1.7 million additional people into higher tax brackets as their salaries increase over time.
The decision has sparked political controversy because during the general election campaign, Labour explicitly promised not to increase VAT, national insurance, or income tax rates. The chancellor had previously stated that freezing thresholds would "hurt working people," leading to accusations that the government has broken trust with voters.
Government Defence and Manifesto Questions
Speaking to Sky News' political editor Beth Rigby on the Electoral Dysfunction podcast, Labour peer Baroness Harriet Harman argued that the chancellor must now make her case directly to "the woman on the doorstep" about why this approach to taxation was necessary. "I think Rachel really answered it very, very clearly when she said, 'well, actually, we haven't broken the manifesto because the manifesto was about rates'," Baroness Harman stated.
She emphasized that the government had avoided increasing actual tax rates, which would have constituted a direct breach of their election promises. Instead, the freeze on thresholds represents an alternative method to increase tax revenue while maintaining the government's commitment to not raising the rates themselves.
Baroness Harman added that every member of the government needs to explain that this difficult decision was taken in the "fairest possible way" and was designed specifically to "protect people's cost of living if they're on low incomes" through counterbalancing support measures.
Prime Minister's Strong Stance on Benefit Changes
Meanwhile, Prime Minister Sir Keir Starmer launched a robust defence of the decision to scrap the controversial two-child benefit cap, condemning the Conservative policy as a "failed social experiment." He sharply criticized those who continue to defend the limit, stating they stand for "a moral failure and an economic disaster."
The prime minister highlighted the human impact behind the statistics, noting that "record highs of child poverty in this country aren't just numbers on a spreadsheet" but represent millions of children experiencing hunger, educational disadvantages, and diminished future prospects despite their parents' efforts.
The two-child limit, which restricts child tax credit and universal credit to the first two children in most households, will be abolished at an estimated cost of approximately £3 billion by the end of this parliament. The government projects this change will lift around 450,000 children out of poverty and ultimately reduce long-term costs by preventing associated issues like welfare dependency while helping more people secure employment.
Sir Keir Starmer has acknowledged that while the government hasn't breached its manifesto commitments on tax rates, people are being asked to "contribute" to protect essential public services during challenging economic times.
