Chancellor Rachel Reeves has announced plans to raise £7.5 billion from millions of workers by freezing tax thresholds for two years, in a move that is expected to increase income tax revenue due to inflation and wage growth.
In a surprise U-turn, Reeves will not raise the headline rate on income tax as previously planned, breaking a manifesto promise made by her government last year. Instead, she has opted for a more gradual approach, maintaining the current level of tax thresholds while increasing revenue through other measures.
Reeves had been under pressure to raise taxes in order to plug a fiscal black hole estimated at £20 billion, but after weeks of careful planning and briefing with Labour MPs, she decided to take a more cautious approach. The decision comes as investors have expressed skepticism about the government's ability to fill the gap through smaller measures.
The move is seen as a compromise between Reeves' commitment to fiscal discipline and her need to deliver stability in the public finances. Her decision has been welcomed by some cabinet ministers, including Health Secretary Wes Streeting, who had warned against breaking manifesto pledges.
However, others have expressed concerns about the U-turn, with some MPs criticizing the government for not being more transparent about its plans. Labour leader Keir Starmer's authority has also been weakened by the episode, with some of his allies briefing that he would fight any leadership coup.
The decision has sent shockwaves through the markets, with UK government bonds on track for their worst day since July and the pound dropping against the dollar. Analysts say that Reeves must now find an extra buffer of £15 billion to meet her target, which is less than many investors had expected.
Reeves' decision has been described as a "debacle" by some Labour MPs, who fear that it will worsen the government's position on taxes. However, others have praised her pragmatism and commitment to stability in the public finances.
In a surprise U-turn, Reeves will not raise the headline rate on income tax as previously planned, breaking a manifesto promise made by her government last year. Instead, she has opted for a more gradual approach, maintaining the current level of tax thresholds while increasing revenue through other measures.
Reeves had been under pressure to raise taxes in order to plug a fiscal black hole estimated at £20 billion, but after weeks of careful planning and briefing with Labour MPs, she decided to take a more cautious approach. The decision comes as investors have expressed skepticism about the government's ability to fill the gap through smaller measures.
The move is seen as a compromise between Reeves' commitment to fiscal discipline and her need to deliver stability in the public finances. Her decision has been welcomed by some cabinet ministers, including Health Secretary Wes Streeting, who had warned against breaking manifesto pledges.
However, others have expressed concerns about the U-turn, with some MPs criticizing the government for not being more transparent about its plans. Labour leader Keir Starmer's authority has also been weakened by the episode, with some of his allies briefing that he would fight any leadership coup.
The decision has sent shockwaves through the markets, with UK government bonds on track for their worst day since July and the pound dropping against the dollar. Analysts say that Reeves must now find an extra buffer of £15 billion to meet her target, which is less than many investors had expected.
Reeves' decision has been described as a "debacle" by some Labour MPs, who fear that it will worsen the government's position on taxes. However, others have praised her pragmatism and commitment to stability in the public finances.
i guess they want to balance the books and all that. but it's not like we're getting any more money, is it? just that our take-home pay might be a bit lower. anyway, it's good that chancellor reeves took a step back and thought about it some more... kinda wish she'd been like that from the start though 
, like think about all those low-income workers who are already struggling to make ends meet... freezing tax thresholds for two years might not sound like a bad thing on paper but trust me it's a whole different story when you're living paycheck to paycheck 
. and what really gets my goat is that the government is just gonna keep piling more debt onto us instead of, like, finding ways to actually support people who need help 
. anyway, let's hope Rachel Reeves can find a way to make this thing work without messing over too many innocent ppl 
she's being super pragmatic and prioritizing stability over making some huge sacrifices 
And tbh, £15 billion is still way more manageable than that initial £20 billion black hole 
...it shows she's trying to avoid a fiscal crisis but also not ignoring the need for revenue 
...she's trying to balance competing pressures and find a middle ground 
but at the same time i get it that the government needs to balance the books or something 
my aunt has a pension and she's all like "well what about me?" 
anyway chancellor rachel reeves seems like a nice person but i'm not sure if this is the right move for the country 
. But this Chancellor Rachel Reeves is all about slowin' down, takin' it one step at a time 
. She's worried 'bout breakin' manifesto promises and losin' her allies 
. It's like tryin' to juggle too many balls - you gotta keep some of 'em in the air 
.
, but now she's got a bigger problem on her hands 
. Investors are gettin' nervous and the markets are gettin' all shook up 
. It's like that old saying goes... when life gives you lemons, make lemonade 
! (Or in this case, when life throws you a curveball, adjust your tax thresholds 
)
. But I do feel for the workers who are gonna see an increase in their income tax bill. Like, £7.5 billion is a lot of money 
. But on the other hand, it feels like they're just trying to avoid making any real changes 
.
. Maybe we'll see some positive economic growth soon? Fingers crossed 