Reeves’ shock U-turn on income tax stuns ministers, MPs and markets
The theories behind Reeves’ income tax U-turn – and the impact it’s made
- Rachel Reeves, the Chancellor, has reversed plans to raise income tax, despite earlier indications she would break a manifesto pledge.
- Treasury sources attributed the U-turn to better-than-expected economic data, though some ministers suggested Downing Street interference to protect the Prime Minister.
- The sudden reversal caused market instability, leading to a spike in government borrowing costs, with 10-year gilts rising to 4.56 per cent.
- Reeves is now expected to consider a range of smaller taxes, including a gambling tax, bank levy, wealth taxes, or a mansion tax on properties valued at £2m and over.
- Economists have warned that relying on a 'grab bag' of smaller tax measures could make the tax system more complicated, inefficient, and potentially damaging.
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