(Reuters) -British Prime Minister Keir Starmer and Finance Minister Rachel Reeves have abandoned plans to raise income tax rates, marking a sharp shift just weeks ahead of the November 26 budget, the Financial Times reported on Thursday, citing officials briefed on the decision.
Reeves was expected to raise tens of billions of pounds in taxes in her budget to stay on track for her fiscal targets, a key issue for bond investors. She is now exploring alternative ways to raise revenue to fill a fiscal hole estimated at up to 30 billion pounds ($40.26 billion), the FT reported.
Reuters could not immediately verify the report. The Treasury and the Office of Budget Responsibility did not immediately respond to Reuters’ requests for comment.
Sterling dipped 0.3% after the report was published.
Starmer and Reeves have scrapped earlier plans to raise basic and higher income tax rates amid concerns the move could anger voters and deepen tensions with discontented Labour lawmakers, the report said.
Reeves and Starmer said before last year’s election they would not raise taxes for “working people”. But on October 29, Starmer declined to commit to the pledge and said the economy was in a worse state than thought.
The FT report said the decision to change plans, taken this week, was communicated to the Office for Budget Responsibility on Wednesday.
Reeves could now instead explore cutting the thresholds at which people pay different rates of income tax, the report added.
The National Institute of Economic and Social Research, a think tank, has urged Reeves to come up with 50 billion pounds’ worth of measures.
($1 = 0.7451 pounds)
(Reporting by Mrinmay Dey in Bengaluru; Editing by Nia Williams)
