Labour MPs yesterday warned Rachel Reeves against breaking the party’s manifesto pledge not to raise income tax.
The Chancellor hinted this week that she is considering a manifesto-busting rise in income tax as she grapples with a black hole in the public finances estimated at up to £30 billion.
Ms Reeves repeatedly refused to stand by Labour’s manifesto pledge not to raise income tax, national insurance or VAT and warned that ‘we will all have to contribute’ at the November 26 Budget.
A Cabinet source yesterday told the Mail that the prospect of breaking a central manifesto promise was causing ‘widespread anxiety’ within government.
‘I don’t know whether she will do it in the end, and that is obviously a matter for her and the PM. But there is widespread anxiety about what it will mean for trust if she does,’ the source said.
Left-wing Labour MPs yesterday broke ranks to warn the Chancellor publicly against the move.
Former frontbencher Clive Lewis said the fallout from the financial crash, Covid and Brexit were well known and could not be used as an excuse for breaking the manifesto pledge. He urged the Chancellor to instead relax her fiscal rules to allow more borrowing.
Rachel Reeves with Education Secretary Bridget Phillipson. The Chancellor hinted this week that she is considering a manifesto-busting rise in income tax
Mr Lewis told the BBC’s Newsnight show: ‘We’ve had some knocks. And to say the international headwinds have changed… yes, they have, but those things are kind of baked into the system. She (Rachel Reeves) knew it, we knew it. We know there’s a perma-crisis, global instability.
‘Don’t come back asking for more tax, come back and change the fiscal rules.’
Fellow Left-winger Diane Abbott urged the Chancellor to focus any tax raid on the wealthy.
‘There should be no tax increases or spending cuts which hit workers and the poor,’ she said. ‘They have already suffered enough. If taxes rise it should be on the ultra-wealthy and big business – it’s time (for them) to pay a fair share.’
Ms Reeves insisted this week that she will not resign even if she breaks a promise she repeated dozens of times in the run-up to last year’s election as she tried to restore Labour’s credibility on the economy.
A friend of the Chancellor told the Mail that she believes the public will ‘forgive’ her if she manages to get the economy growing again.
‘She is prepared to be unpopular to do the right thing,’ the source said. ‘She knows how unpopular it will make her but she believes we have to break this cycle of decline. If maintaining investment is the route to growth – and she can cut taxes again before the election – then maybe there is a route to forgiveness.’
Tony Blair’s think tank today warns that any significant tax cuts this month should be ‘temporary’.
The Tony Blair Institute said any manifesto-busting increase should be ‘temporary and conditional – a short-term measure to stabilise the public finances, not a permanent shift in direction’.
It added: ‘The message should be that today’s discipline creates tomorrow’s dividend. Once growth strengthens and public service reforms deliver results, the gains should be returned to taxpayers through targeted tax cuts before the election.’