In a significant policy reversal, Chancellor Rachel Reeves is set to abandon plans to raise income tax in her upcoming November budget. This move represents a major U-turn for the Labour government, breaking one of its key manifesto commitments made to the electorate.
Budget U-Turn Details
The Chancellor had previously informed the Office for Budget Responsibility of her intention to increase income tax. However, the Guardian has confirmed that these central measures have now been ditched. According to the Financial Times, which first reported the story, Reeves may instead consider adjusting the thresholds at which people begin paying tax. This could effectively function as a stealth tax rise for many Britons.
This reversal leaves the Treasury facing a significant challenge. Reeves is now expected to rely on a series of smaller tax increases to fill what is projected to be a multibillion-pound shortfall in the public finances. This financial hole has been exacerbated by weaker-than-expected productivity and other policy reversals, including cuts to winter fuel allowances and disability benefits.
China's Economic Slowdown Deepens
On the global stage, fresh economic data from China has revealed a concerning slowdown. Official figures show that both factory output and retail sales grew at their most sluggish pace in over a year during October.
According to China's National Bureau of Statistics (NBS), industrial output expanded by just 4.9% year-on-year in October. This marks the weakest annual growth rate since August 2024 and represents a sharp decline from September's 6.5% rise. The figure also fell short of the 5.5% growth forecast by analysts in a Reuters poll.
Meanwhile, a key indicator of consumer confidence also faltered. Retail sales growth slowed to 2.9% last month, down from 3.0% in September and registering the poorest performance since August of the previous year.
Implications and Market Watch
These disappointing figures will intensify pressure on policymakers in Beijing to implement more substantial support measures for China's export-driven economy. The nation faces mounting risks from an ongoing trade war with the United States and persistently weak domestic demand.
Looking ahead, today's economic agenda includes the Eurozone trade balance for the third quarter and a second estimate of Eurozone GDP, both due at 10 am GMT. Additionally, Jaguar Land Rover is expected to release a Q2 update later this morning, providing further insight into the health of the UK manufacturing sector.
