𝓤𝓷𝓲𝓽𝓮𝓭 𝓝𝓮𝔀𝓼

Rachel Reeves has been warned she will break a manifesto commitment if she launches a new tax raid to fill the £50billion-plus black hole in the nation’s finances. Fears are growing that the Chancellor will keep the point at which people start paying income tax frozen at just £12,570. There is major concern more low-income workers and pensioners will pay the tax if Ms Reeves goes back on plans to scrap the freeze by April 2028.

A landmark report this week warned she will need to find £51.1billion in tax hikes and spending cuts a year by 2029-30 to plug a budget deficit of £41.2billion and preserve a £9.9billion “buffer” against economic shocks. Labour went into the election with the promise not to “increase taxes on working people”. The Chancellor has been told the freeze in thresholds is already hurting the living standards of households – and extending it would be “at odds” with the manifesto pledge.

Ben Ramanauskas, a senior research fellow in economics at Policy Exchange, said: “It is deeply unfair for the Government to take even more of their hard-earned money in taxes, especially when many people are struggling to make ends meet.

“The Chancellor needs to get a grip on the public finances by slashing wasteful spending so that it can cut taxes for hard-working people. It should start by finally unfreezing income tax thresholds.”

Reform UK deputy leader Richard Tice doubled down on his party’s pledge to radically increase the point at which income tax must be paid.

He said: “Labour will use every lever to tax Brits more, stunting economic growth and making us poorer as they waste our money. Only Reform UK will make work pay by raising the income tax threshold to £20,000 in our costed plan, lifting millions of the lowest-paid workers out of tax, helping people back into work and stimulating productivity in this country.”

The National Institute of Economic and Social Research – which identified the scale of the looming black hole in the national finances – has warned keeping thresholds frozen would raise “much less” than in recent years. It says the freeze resulted in an estimated £10.1billion boost to tax revenues in 2024-25 but is likely to raise “only an additional £5.8billion by 2029-30” due to slowing wage growth.

The economic watchdog added that extending the freeze “would particularly affect poorer households and is at odds with the Government’s manifesto pledge not to raise taxes on working people and with its mission of boosting living standards in every part of the United Kingdom”.

According to the House of Commons Library, between 2020-21 and 2025-26, “the numbers of individuals of state pension age paying income tax are forecast to rise from 6.47million to 8.72million”.

Tom Clougherty, of the Institute of Economic Affairs, warned the freeze means “more people end up paying higher rates of tax without becoming any richer in real terms”. He expects it “to continue with no end in sight”.

He added: “But we shouldn’t fool ourselves – this is having a real impact on the spending power of ordinary families.”

Maxwell Marlow, of the Adam Smith Institute, said: “With the economy in dire straits and working people at the brunt of it, the British people cannot afford higher taxes to fund the waste and avarice of the state.”