More Chaos – Or The Right Move? MPs Are Divided After Reeves Dropped Plans To Hike Income Tax

Chancellor Rachel Reeves has decided not to hike income tax in her Budget after all.MPs cannot agree whether it was the right move for the government to unexpectedly chose to drop plans to hike income tax in its upcoming Budget or if it just makes Labour look even weaker.As first reported by the Financial Times, Rachel Reeves told the Office for Budget Responsibility on Wednesday she was no longer going forward with the income tax increase – despite repeatedly laying the groundwork for such a change only last week.It was initially said that the chancellor had changed her mind amid wider fears of backlash from Labour MPs and voters at a time when the government is already deeply unpopular with the public.Bloomberg has since reported that better economic forecasts suggested Reeves’ fiscal black hole was closer to £20 billion instead of £30 billion, as expected – enabling her to pull back on some of her radical plans.This U-turn means Reeves won’t break her manifesto pledge not to hike income tax, either.However, the chancellor does still have to fill a large gap in the public finances when she unveils her Budget on November 26 – and it remains unclear how she intends to raise the necessary revenue.MPs seem split in their response to the reports.“Phew, it seems like someone stopped Torsten Bell from destroying everything,” one Labour MP told HuffPost UK.Bell is a Treasury minister who used to head up the Resolution Foundation, a think tank which came up with a plan for increasing income tax while also cutting national insurance to move the financial burden onto higher-earners.They added: “Is it the government or the Resolution Foundation who are supposed to write the Budget?”Others to the left of the party appeared to defend the government saying it was “not really a U-turn” because it was never confirmed.They called again for the Treasury to look at wealth taxes to raise revenue, an option the government has repeatedly ruled out.Keir Starmer and Rachel Reeves face an enormous challenge of trying to get the economy back on its feet.Meanwhile, Labour MP Clive Lewis criticised the flip-flopping from the chancellor. He told HuffPost UK: “This isn’t an economic strategy. It is a stream of conflicting press releases held together by a spreadsheet.”He continued: “It doesn’t build confidence and it puts another crack in the chancellor’s own fiscal rules.“Rules which currently drive austerity and, as we are now seeing, greater economic and yes, political instability.“What we need are fiscal rules that support investment in the parts of the economy that actually create jobs and resilience.“At some point a Labour government will have to decide what its fiscal rules are for: to satisfy a fading economic orthodoxy that has failed the country for forty years, or to back the British people, small businesses and long-term stability.”A senior Labour source also told HuffPost UK: “Keir and Rachel – in office, but not power.”The Lib Dems, meanwhile, have welcomed the decision.Deputy leader Daisy Cooper said: “If true, this 11th hour screeching u-turn might just spare struggling families from yet another punch in the stomach Budget.“The chancellor should look at our plan for a windfall tax on the big banks’ billions in profits and put £270 back into people’s pockets.”The Conservatives’ leader Kemi Badenoch said the reports were “good” if accurate.“Only the Conservatives have fought Labour off their tax-raising plans,” she wrote on X. “But one retreat doesn’t fix a Budget built on broken promises. Reeves must guarantee no new taxes on work, businesses, homes or pensions -and she should go further by abolishing stamp duty.”Tory chairman Kevin Hollinrake said: “What Rachel Reeves fails to grasp is that this constant ‘will she, won’t she’ briefing is rattling the markets and undermining business confidence.“It’s bad for growth, bad for investment and bad for jobs. The country is paying the price for her indecision.”The SNP’s Westminster leader Stephen Flynn said in a statement: “This isn’t government, this is chaos.“Labour give the impression of a party that has completely lost control – playing a dangerous game with people’s finances so that their prime minister can try to cling to power.“But everyone now knows the clock is ticking until he is dumped from Downing Street.“His last act should not be to play fast and loose with the public finances – they’ve already more than paid the price for the constant chaos and crisis that passes for politics at Westminster.”The responses come as pollsters at YouGov found 76% of the public are opposed to increasing the basic rate by 2.5p or 5p.A further 64% would oppose a 1p increase in the basic rate of income tax, while.Related...Rachel Reeves 'Rips Up' Plans To Raise Income Tax In The BudgetRachel Reeves' Planned Tax Betrayal Could Be The Death Of LabourAnalysis: Rachel Reeves's Planned Tax Betrayal Could Be The Death Knell For Labour

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