Treasury won’t cut threshold for higher rate income tax, say sources – UK politics live | Politics
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- November 14, 2025
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Treasury not considering cutting thresholds for higher rates of income tax, sources say
This is from Pippa Crerar, the Guardian’s political editor, on where we stand this morning after all the fallout from the budget income tax U-turn. She confirms that sources are now ruling out cutting the thresholds for paying higher rates of income tax.
She says government insiders claim the change is all down to better-than-expected fiscal forecasts, and that Labour opposition to the proposal was not a factor.
Where we are on budget after revelation Rachel Reeves will no longer hike income tax rates
– Treasury confirms that stronger than expected OBR forecasts means fiscal gap is closer to £20bn than previously speculated £30-£40bn. Reeves also wants headroom of around £15bn in addition.
– This means Reeves does not need to become first chancellor in 50 years to raise basic rate on income tax – breaching a central manifesto promise.
– Improved forecasts are result of stronger wage growth (and therefore higher tax receipts) which started to feed into figures last week.
– But £20bn is still big number – so expect income tax thresholds to be frozen for another two years, taxes on salary sacrifice schemes, fuel duty equivalent for electric vehicles – plus ‘smorgasbord’ of other measures.
– As per previous post, I’m told that income tax thresholds will not be cut, despite speculation.
– Govt insiders say decision to drop income tax plan is nothing to do with political fall-out after Reeves publicly signalled manifesto breach – causing huge anxiety among Labour MPs (which ultimately fed into No 10’s extraordinary attempts to shore up PM).
– They defend decision to ‘roll the pitch’ on income tax rises – saying at that point they thought it might be necessary and leaving it to just before budget would’ve spooked MPs and markets.
Key events
Jeremy Hunt, the former Tory chancellor, has told Times Radio that he thinks there are too many leaks coming out of the Treasury. He said:
There are always some leaks, but it appears that there’s a huge amount of leaks coming from the Treasury. And the Treasury normally has a reputation of being one of the most tight departments. And the budget decisions are kept to a very restricted number of people.
But for some reason, these leaks have been coming out thick and fast. And I think that does make the process feel a lot more chaotic ….
I do think that there is a leakiness now, which is making it difficult. Remember, the whole world is reading this information and they’re looking at British economic decision making. And it looks very chaotic and I don’t think that’s a good thing.
Government sources are briefing (eg here and here) that the Treasury income tax budget U-turn was not related to Keir Starmer’s leadership being under pressure.
But not everyone is convinced. This is what Jim O’Neill, the former Goldman Sachs chief economist who served as a relatively apolitical Treasury minister for a year under David Cameron (in the Lords he’s now a crossbencher) told the World at One about the shift.
When I reflect on it, it’s pretty hard to escape the conclusion that the change of mindset is being done because of the divisions inside the Labour party, which one can get. But, if you are trying to run a country with the tricky challenges that we have, I think you’ve got to be very careful to not send messages to financial markets that you are going to put party consolidation ahead of fiscal credibility.
O’Neill also said that the U-turn made him wonder whether the government had the will to push through difficult decisions. Asked if he thought it had the “steel” needed for further reforms, he replied:
If we would have had this conversation two weeks ago, I would have said to you I think that they have developed the steel. But, looking at some of the other shenanigans going on with briefings in Number 10 and now this, it bothers me.
I hope I will be pleasantly surprised. But if this is how it’s going to go, I’m disappointed and a bit concerned.
If you are looking for some more uplifting political news today, Amy Sedghi is reporting that Larry the Cat will soon be the longest continuous resident of Downing Street since Pitt the Younger. He is also one of the most admired. She has written a lovely piece about him, which is illustrated for her with good video footage too. (Larry v the fox is especially fun – Larry wins.)
In her analysis of the income tax budget U-turn, Beth Rigby from Sky News says that there is anger in Downing Street about the fact that the news leaked last night. She says No 10 did not want the news to come out now and that Keir Starmer had been planning to give a speech on this next week.
Whether or not that speech will still go ahead is not clear.
Government urged to take control of assisted dying bill as peers warned 900-plus amendments could sink it
The assisted dying bill risks running out of time to become law, the Lords has heard amid a record high number of suggested changes to the draft legislation. In its report on the commitee stage debate on the bill in the Lords, PA Media says:
Peers began their first of at least four days of detailed line-by-line scrutiny of the bill which could see assisted dying legalised for terminally ill adults in England and Wales.
More than 900 amendments have been put forward – the highest number ever tabled to a piece of backbench legislation.
The Dignity in Dying group, which campaigns for a change in the law, has warned “the risk of deliberate time-wasting is clear and profoundly unfair”.
But a number of peers told Friday’s debate they can only support bills which are “legislatively fit to be passed”, describing this one as “demonstrably flawed”.
The terminally ill adults (end of life) bill will become law only if both the House of Commons and House of Lords agree on the final drafting of the legislation – with approval needed before spring when the current session of parliament ends.
Gisela Stuart said there are “so many flaws” with the bill in its current form “that I don’t think this house, however long we debate it, can actually get it to a stage where it is legislatively fit to be passed, and that is our role”.
She told her colleagues on the Lords’ red benches: “We should not vote for anything that cannot legislatively be properly implemented.”
Andrew Tyrie said while he is a supporter of the bill’s intentions, it is “demonstrably flawed”.
He suggested the government must take more control of the draft legislation, which is currently proceeding through Parliament as a private member’s bill (PMB).
With less time allocated compared with government legislation, it can be more vulnerable in the face of any delays during the parliamentary process.
Tyrie said: “Surely the government should now be listening. They should now be grasping that they need to take this Bill in themselves … I think attempting to deal with these 900 amendments in this way is going to end up with the bill being talked out.
Former Paralympian Tanni Grey-Thompson urged the government to say what is “going on behind the scenes” to implement assisted dying.
A vocal opponent of the bill, the crossbench peer said she recently met a member of the public in the City of London, who said he was working “full time” on the rollout, adding: “I’m not sure he meant to tell me that.”
She told peers: “I think we do need to understand how many civil servants are currently working on this. Who’s running the Bill team?”
According to the parliamentary authorities, while some bills have had more amendments tabled in total at committee stage, this sets a possible record for the number submitted in the first full list of suggested changes and is almost certainly unprecedented for committee stage of a private member’s bill.
Not all tabled amendments will necessarily be debated as members can choose to withdraw theirs during the process.
The list of all 942 amendments that have been tabled is here. It runs to 234 pages.
The leftwing Labour MP Clive Lewis has welcomed the news that Rachel Reeves won’t raise income tax in the budget. But he is not impressed by her budget strategy.
It’s being trailed in the media that the chancellor won’t, after all, break the manifesto pledge on income tax. If that holds, I welcome it. Breaking the pledge would drive yet another nail into the coffin of political trust. That damage would’ve been worse if a rise came without (still needed) matching action on income from wealth, or on profiteering in energy, food and housing. As I say in this clip from the Daily Politics, what we’re getting now is “a rolling PR campaign with a spreadsheet attached”, not a considered economic or political strategy.
This isn’t an economic strategy. It’s a stream of conflicting press releases held together by a spreadsheet. It doesn’t build confidence & it cracks the Chancellor’s own austerity-driven fiscal rules
So change the rules
Support people, small business & rebuild public services
Badenoch claims BBC employs too many people who are activists, not journalists, and calls for ‘root and branch reform’
In her broadcast clip, Kemi Badenoch said that the BBC was right to apologise to President Trump over the mistake in the way his 6 January 2021 speech was edited for a Panorama documentary and she said she hoped that Trump would drop his threat to sue the corporation over this.
Asked if she would ask Trump to drop his legal action if she were prime minister, Badenoch replied:
If I was prime minister, the BBC would not have got away with putting out a documentary that had fake news in it, so we wouldn’t be in this mess in the first place.
The BBC needs root and branch reform.
I’m glad that the head of news has resigned, but as we have seen with their coverage on the Middle East – it’s not just the coverage with the US, you look at the coverage even on basic issues, like biological fact on sex and gender – the BBC has been a mess.
They have a lot of people there who are not journalists but are activists. They need to be put under control immediately.
Plaid Cyrmu is also saying the government’s budget planning has been a mess. This is from Ben Lake, the party’s Treasury spokesperson at Westminster.
A budget rewritten in panic cannot deliver for Wales. When the chancellor rips up major proposals less than a fortnight before budget day – triggering a sell-off in government bonds – it shows something is fundamentally broken at the heart of this UK Labour government.
Wales needs stability and the ability to plan ahead. Instead, we’re handed a budget reshaped on the hoof to contain Labour infighting – not to meet the needs of Welsh communities.
This is no way to run an economy, especially when devolved public services rely on predictable funding. When Westminster uncertainty pushes up borrowing costs, it’s our communities that pay the price.
Badenoch claims she has never seen ‘this level of chaos’ ahead of a budget as Labour showing now
In a statement last night Kemi Badenoch, the Conservative leader, said it was “good” if Rachel Reeves has ruled out putting up income tax. (See 8.40am.)
This morning she said the government was being “completely irresponsible”.
In a clip for broadcasters, asked about the overnight story from the Treasury about income tax not going up, she said:
It’s quite clear that the government doesn’t know what it is doing.
What they have announced today is completely irresponsible, given all of the announcements about all the tax rises they’re going to raise.
It’s very clear that they’re in a mess. They’ve been talking about tax rises on income tax for ages now, weeks and weeks throughout the summer. Now that they’re saying no.
It’s good if they’re not going to increase income taxes. But the truth is they shouldn’t be increasing any taxes at all.
But I’ve never seen a government do this in the run-up to a budget. I have never seen this level of chaos, this level of irresponsibility.
The two statements aren’t completely incompatible – Badenoch’s overall point is that Tories don’t approve of tax rises, and they think the government’s handling of this has been a mess – but you could be forgiven for being confused
Badenoch also said this was a “government in chaos”. She explained:
The day before yesterday, the prime minister had to refer himself to a standards adviser. He’s got three or four members of his cabinet who are being investigated for all sorts of things. You look at what happened the day before yesterday, hearing about a coup. Some cabinet ministers want to overthrow the prime minister. They are not focused on running the economy.
Too much market-sensitive economic forecast information getting out ahead of budget, says thinktank
The Resolution Foundation has expressed concern about the amount pre-budget briefing that has come out this year about the financial forecasts. This is from Ruth Curtice, the thinktank’s chief executive.
At the budget the chancellor needs to do three things: take decisive steps to improve the public finances and increase the financial buffers against her fiscal rules; address cost of living pressures for families and support the Bank of England in lowering inflation; and in the interest of growth make tax changes that improve the system overall.
There is more than one way to skin this particular cat, and we won’t know until we see the whole package whether she has achieved these three objectives.
Much depends on the forecasts from the Office for Budget Responsibility. A significant economic deterioration would leave the chancellor choosing whether to break the spirit or letter of her manifesto pledge on income tax. A more benign economic outlook will make it far easier to avoid breaking it at all.
It is normal for economic forecasts and policies to change in the run up to the budget. It is not normal for so much of that to be laid bare in public. The market moves this morning and in recent weeks suggest a serious look should be taken at the approach to market-sensitive forecast information.
Ed Conway from Sky News was making a similar point earlier. (See 11.38am.)
Treasury not considering cutting thresholds for higher rates of income tax, sources say
This is from Pippa Crerar, the Guardian’s political editor, on where we stand this morning after all the fallout from the budget income tax U-turn. She confirms that sources are now ruling out cutting the thresholds for paying higher rates of income tax.
She says government insiders claim the change is all down to better-than-expected fiscal forecasts, and that Labour opposition to the proposal was not a factor.
Where we are on budget after revelation Rachel Reeves will no longer hike income tax rates
– Treasury confirms that stronger than expected OBR forecasts means fiscal gap is closer to £20bn than previously speculated £30-£40bn. Reeves also wants headroom of around £15bn in addition.
– This means Reeves does not need to become first chancellor in 50 years to raise basic rate on income tax – breaching a central manifesto promise.
– Improved forecasts are result of stronger wage growth (and therefore higher tax receipts) which started to feed into figures last week.
– But £20bn is still big number – so expect income tax thresholds to be frozen for another two years, taxes on salary sacrifice schemes, fuel duty equivalent for electric vehicles – plus ‘smorgasbord’ of other measures.
– As per previous post, I’m told that income tax thresholds will not be cut, despite speculation.
– Govt insiders say decision to drop income tax plan is nothing to do with political fall-out after Reeves publicly signalled manifesto breach – causing huge anxiety among Labour MPs (which ultimately fed into No 10’s extraordinary attempts to shore up PM).
– They defend decision to ‘roll the pitch’ on income tax rises – saying at that point they thought it might be necessary and leaving it to just before budget would’ve spooked MPs and markets.
Here is the clip of Wes Streeting denouncing striking doctors on LBC earlier. See 11.26am for the full quotes.
The Liberal Democrats are urging Rachel Reeves to face the press and explain her plans today. Sarah Olney, the party’s business spokesperson, said:
The chancellor gave a press conference to trail her income tax hikes. She must come before the British public today, unroll that particular pitch and come clean on what on earth is going on at the Treasury.
Ed Conway, Sky News’s economics editor, says a Bloomberg report saying the fiscal forecast is better-than-expected (see 9.03am) led to gilt yields coming down a bit (see 9.31am).
Here is my colleague Kiran Stacey’s take on what we know about the budget.
Some things to bear in mind about these late changes to the budget:
1) Govt sources say the forecasts changed. But the only new thing they learned this week was the OBR’s assessment of their own plans.
Maybe the OBR said their tax rises would raise more than expected?
2) Three major tax-raising measures now at the heart of the budget:
– Freezing tax thresholds – raises an estimated £7.5bn
– Ending salary sacrifice benefits for pensions – £2bn
– Tax on EVs – £2bn
3) We’re now told the black hole needing to be filled is around £20bn. Plus the chancellor wants to increase her headroom.
So where is the rest of the money coming from?
The BBC’s charter review will examine political appointments to the broadcaster’s board, Lisa Nandy has said, as they have “damaged confidence and trust”, Jamie Grierson reports.
Yesterday and this morning some of the political editors were being briefed that Rachel Reeves was considering lowering higher income tax thresholds in the budget (see 8.57am, 9.03am and 10.20am.)
Now other political editors (see here and here, for example) are being told that is not happening.
That suggests that the line has either changed, or been clarified, as the morning has gone on.
The Treasury is not saying any of this on the record. That is normal with a budget. But that does not mean they don’t talk to journalists, and it does not mean don’t think hard about how letting the City know what to expect. It is important that when the budget does get announced, the markets don’t get a nasty shock.
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