Labour Under Fire as Budget Looms and Tax Rise Rumours Swirl
Chancellor Rachel Reeves is facing growing criticism after reports emerged suggesting she is considering a 2p increase in income tax — a move that would break Labour’s key election promise not to raise taxes on working people.
According to Whitehall sources, Reeves and her Treasury team are actively exploring ways to raise additional revenue ahead of the upcoming Autumn Budget, as the government struggles to plug a multi-billion-pound black hole in the public finances.
The potential rise would affect millions of working Britons, sparking fears that Labour could backtrack on one of its central manifesto pledges just months after entering government.
Keir Starmer Refuses to Rule Out Tax Hikes
The speculation intensified after Prime Minister Keir Starmer notably refused to rule out tax rises during Prime Minister’s Questions on Wednesday. When pressed by opposition MPs to confirm that the government would not raise income tax, National Insurance or VAT, Starmer declined to repeat the commitment made during the election campaign.
His silence has been interpreted by political observers as a clear sign that Labour’s fiscal stance is shifting, with the Treasury exploring “all available options” to raise funds.
With the next Budget fast approaching, the move is likely to spark outrage among middle-income earners already struggling with the cost of living crisis.
Why Reeves May Be Forced Into a Tax Rise
Sources close to the Treasury suggest that Reeves is considering a temporary 2p increase to the basic rate of income tax as part of a “stabilisation plan” to reduce the deficit and fund key public services.
The Chancellor is reportedly facing mounting pressure from economists and international markets to present a credible plan to balance the books. Following years of borrowing, Reeves has vowed to restore “economic credibility” and has repeatedly emphasised her commitment to “sound money and fiscal responsibility.”
However, critics argue that this could come at the expense of working families, who would shoulder the financial burden of Labour’s economic reset.
Broken Promises and Political Fallout
During the general election, both Starmer and Reeves were clear: no rises in income tax, National Insurance, or VAT.Labour positioned itself as the party that would rebuild the economy without squeezing household budgets further.
If Reeves proceeds with the tax rise, it would represent a major political U-turn and risk damaging Labour’s credibility with voters.
Conservative MPs have wasted no time in attacking the government. One senior Tory MP said:
“Labour told voters they wouldn’t raise taxes. Now, just a few months in, they’re plotting to raid the pockets of working people. This is a betrayal.”
Public backlash could be fierce, particularly among those already facing record mortgage rates, rising rents, and stagnating wages.
What a 2p Income Tax Rise Would Mean for You
If implemented, a 2p increase in the basic rate of income tax would mean that workers currently paying 20% on earnings above the personal allowance could see their rate rise to 22%.
For someone earning £35,000 a year, that could mean an extra £400–£500 in tax each year, depending on their personal circumstances.
While the Treasury might argue that the extra revenue is needed to fund NHS investment and education spending, critics say it risks deepening the financial strain on ordinary households.
Reeves’ Balancing Act: Economic Stability vs. Voter Trust
Reeves has built her reputation on being a cautious and competent economist. But she now faces a serious dilemma: how to balance the books without breaking faith with voters.
If she goes ahead with the income tax rise, Reeves could claim it’s a necessary step to stabilise the economy. But politically, it would hand the opposition a powerful weapon — and could shatter Labour’s image as a party that stands for working people.
With the Budget announcement just weeks away, all eyes will be on the Chancellor to see whether she sticks to her fiscal rules — or gambles with her party’s promises.