Vithanage Erandi Kawshalya Madhushani Jade Times Staff
V.E.K. Madhushani is a Jadetimes news reporter covering Political.
Chancellor Rachel Reeves explores options to raise £7bn without breaching manifesto pledges
Labour government sources are defending an anticipated move in the upcoming budget to freeze income tax thresholds beyond 2028, arguing it does not violate the party’s election manifesto promise not to increase taxes on working people. The freeze, which could generate £7bn in additional revenue, would effectively bring more people into the tax system or push them into higher tax brackets as wages rise.
The previous Conservative government froze tax thresholds in 2022, with plans to gradually increase them from 2028. However, Chancellor Reeves is reportedly considering extending this freeze, a decision that could impact around 400,000 people, raising their tax contributions through a process known as "fiscal drag."
Despite concerns that this approach might breach Labour’s election pledge, party sources emphasize that their manifesto specifically promised not to raise tax rates rather than thresholds. As a result, while wages increase and more people fall into higher tax brackets, the actual rates of 20%, 40%, and 45% will remain unchanged.
Labour previously criticized the Conservative government’s similar move as a "stealth tax" but has not committed to reversing it. As Reeves seeks to find £40bn through savings and tax changes ahead of the budget on 30 October, she faces mounting pressure to balance government finances without breaking campaign promises or imposing real-terms cuts to public services.
