As the leaves turn and the nights draw in, all eyes are on Chancellor Rachel Reeves as she prepares to deliver her inaugural Autumn Budget. And if whispers from Whitehall are to be believed, a chill wind may soon be blowing through the nation’s pay packets.
The Spectre of Stealth Taxes
At the heart of the speculation lies a policy known as “fiscal drag” – a freeze on income tax thresholds that, while leaving headline tax rates untouched, gradually pulls more earners into higher tax bands as wages rise. It’s a strategy that former Chancellor Rishi Sunak deployed to significant effect, and one that Jeremy Hunt, his successor, chose to extend.
Now, it seems Reeves is preparing to take this policy further still, potentially prolonging the freeze beyond its current 2028 expiry date. Treasury sources suggest this could net the exchequer a cool £7 billion per year in extra revenue.
Plugging the Fiscal Hole
The allure of such a substantial windfall is clear. Labour has inherited a yawning £40 billion gap in the public purse – a legacy, they argue, of the previous Conservative government’s fiscal mismanagement. Reeves is therefore casting her net wide in search of revenue-raising measures to bridge this chasm.
“We are going to keep our manifesto pledges. I’ve made that very clear. I’m not going to pre-empt the individual measures that will be outlined by the chancellor in due course, but I’m equally clear – this is going to be a budget that will fix the foundations and rebuild our country.”
– Prime Minister Keir Starmer
Alongside the income tax freeze, hikes to inheritance tax and capital gains tax on shares (though not on second homes) are also believed to be in the chancellor’s sights. However, doubts are growing over whether Labour’s much-vaunted crackdown on non-dom tax status will yield as much as initially hoped.
Redefining the Rules
In her quest for fiscal wiggle room, Reeves is also understood to be weighing changes to the very rules that govern the Treasury’s borrowing limits. By redefining how the national debt is measured, billions in extra capital could potentially be unlocked for long-term infrastructure investment.
It’s a bold move, but one that insiders say is still very much on the table as budget day looms. “All options are still in play,” a Whitehall source confided. “The Chancellor is prepared to make changes to the fiscal rules if necessary.”
Opposition Outcry
Unsurprisingly, Reeves’ rumoured tax plans have already drawn fire from across the aisle. Conservative MPs were quick to cry foul, arguing that any extension of the income tax threshold freeze would fly in the face of Labour’s manifesto pledge not to raise taxes on “working people.”
“If Labour think they can hike taxes on hardworking families by stealth, they’ve got another thing coming. The British people won’t be fooled by this smoke and mirrors approach.”
– A senior Conservative source
The prime minister, however, was quick to dismiss such criticisms on a visit to Germany. “We are going to keep our manifesto pledges,” Keir Starmer insisted. “I’ve made that very clear.”
The Waiting Game
For now, all we can do is wait. The budget is still weeks away, and Reeves and her team will no doubt be burning the midnight oil at the Treasury as they seek to thread the needle of raising revenue while honouring electoral promises.
But one thing is certain: in these economically turbulent times, with a cost-of-living crisis still biting and public services creaking under the strain of austerity, the decisions taken in this budget will ripple through every household in the land. The stakes, it seems, could scarcely be higher.
