Reeves Faces Blame for Worst Budget in History After Tax U-Turn Scandal

Rachel Reeveswas charged with transforming Britain into an 'economic joke' following her abrupt decision to halt her plans to increase income tax.

The Finance Minister invested several weeks in preparing the groundwork for a tax increase that would violate the manifesto, affecting millions of workers this month.Budget, before causing turmoil in the City on Friday with an unexpected reversal.

Government officials stated that the shift in position occurred following better projections from the Office for Budget Responsibility (OBR) watchdog, which left her with a £20 billion shortfall to address — significantly less than previously anticipated.

However, she was accused of making the dramatic decision, which followed poorly handled No 10 briefings regarding a potential coup againstKeir Starmer, because LabourMembers were worried about losing their positions if she violated the party's promise made before the election to not collect additional funds from employees.

Although Treasury officials dismissed claims that Ms. Reeves might alter income tax thresholds, she is likely to maintain the existing bands for several more years, causing millions to move into higher tax brackets.

Rather than a single decisive action of raising income tax, the Chancellor will need to discover alternative methods to fill the financial shortfall, thereby allowing for a variety of additional increases.

Shadow Chancellor Mel Stride said to the Daily Mail: 'We are seeing the most chaotic pre-Budget period ever. The ongoing leaks, briefings, and speculation are creating uncertainty and harming our economy.'

Markets are unsettled and business confidence has hit an all-time low. This represents widespread disorder on a massive scale. We are turning into an economic joke under Labour.

Former chancellor Sir Jeremy Hunt stated to Times Radio: 'The entire world is examining this information and observing how Britain is making its economic choices.'

And it appears extremely disorganized, and I don't believe that's positive.

It was generally anticipated throughout the past month that Ms Reeves would need to raise income tax in her crucial Budget address on November 26 to stabilize the finances.

She delivered an unexpected "scene-setter" speech at Downing Street last week, where she did not rule out increasing taxes. In an interview on Monday, she provided her clearest indication so far, stating to the BBC: "It would, of course, be possible to stick with the manifesto commitments, but that would require significant reductions in capital spending."

It was believed that she informed the OBR that she intended to raise the standard rate of income tax for the first time in half a century, increasing it by 2p, while reducing employee National Insurance by 2p, in an effort to generate £6 billion.

However, on Thursday night, the Financial Times reported that she had 'abandoned' the proposal, leading to a sell-off in gilts when markets opened, which temporarily caused government borrowing costs to rise sharply.

Nigel Green, the head of the international financial consulting company deVere Group, cautioned: 'This is precisely how loss of trust issues start. The response is clear.'

Treasury officials are being informed by bond traders that they will not accept conflicting messages.

Anna Leach from the Institute of Directors stated, "The disclosure of the Treasury's operations is significantly harmful to business confidence and the capacity of business leaders to strategize and invest."

Even Labour's preferred think-tank, whose former leader Torsten Bell is assisting in drafting the Budget, stated, 'extremely high levels of Budget-related speculation could increase market instability.'

Ruth Curtice, the head of the Resolution Foundation, stated: 'It is unusual for such a significant portion to be openly discussed in public.'

A YouGov survey revealed that nearly two-thirds of British people (63 percent) feel the Government is managing the upcoming Budget poorly, even though the majority (58 percent) believe it was correct not to increase income tax.

A predicted "smorgasbord" strategy for Ms. Reeves to raise funds from various sources is expected to include measures like pay-per-mile fees for electric vehicle owners, increased gambling taxes, and reductions in tax relief for employees who use "salary sacrifice" programs to purchase high-cost bicycles.

Her decision to reverse her stance on income tax was praised by Health Secretary Wes Streeting, who said to LBC radio: 'I am not in favor of violating manifesto commitments.'

Labour MPs informed the Politico website that Sir Keir and Ms Reeves 'backed down' from a courageous action and 'prioritized immediate survival over the country's best interests. That is quite inexcusable.'

A representative from the Treasury stated: 'We refrain from commenting on rumors regarding tax adjustments that occur outside of official fiscal announcements.'

How Labour prepared us for a rise that never took place

July 3:Rachel Reeves highlights following the cancellation of disability benefit reductions: "Naturally, there is a financial impact from the welfare reforms that Parliament approved this week, and this will be evident in the Budget."

Sep 23: The Resolution Foundation, a preferred think tank of Labour, calls on the Chancellor to raise income tax by 2p, balanced with a 2p reduction in employee National Insurance.

Sep 29:Asked at the Labour conference about whether she will need to increase taxes, Ms Reeves warns: 'The world has shifted'

Oct 11: At the IMF annual gathering in Washington DC, the Chancellor states: 'As we receive the forecast and as we formulate our plans, naturally we are considering additional steps regarding taxes and expenditures, to ensure that public finances remain balanced.'

Oct 23: The Guardian states that Ms Reeves is thinking about increasing income tax but is 'concerned' about proceeding with it.

Oct 29:Keir Starmer does not exclude the possibility of an increase in income tax when questioned during Prime Minister’s Questions, stating simply: 'The Budget is scheduled for November 26, and we will present our proposals.'

Nov 3: Defense Secretary John Healey refuses to restate the Labour Party's manifesto pledges regarding taxes, stating: 'That is for the Budget and for the Chancellor to reveal at the end of the month'

Nov 4: In an extremely rare early-morning 'scene-setter' address at Downing Street, Ms Reeves does not exclude the possibility of an increase in income tax, stating: 'You will have heard much discussion about the decisions I will take. I recognize that these are significant choices that will influence our economy for many years ahead.'

Nov 7: The newspaper The Times states that the Chancellor has informed the Office for Budget Responsibility, an economic watchdog, that an increase in income tax is among the 'key actions' she plans to reveal in the upcoming Budget.

Nov 10:Ms. Reeves again suggests she may violate the manifesto tax promise, stating to BBC Radio Five Live: 'It would, of course, be possible to adhere to the manifesto commitments, but that would involve significant reductions in capital expenditure'

Read more

• Is Rachel Reeves's upcoming Budget going to compel Labour to abandon its tax commitments amid rising economic instability?
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• Will Rachel Reeves eliminate Labour's tax commitments through possible increases in income tax as controversy grows over upcoming policy changes?
• Could Chancellor Rachel Reeves' bold tax increase proposals harm Labour, which is struggling in the polls following only four chaotic months in office?
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