Labour chancellor Rachel Reeves has said she will not extend the freeze on income tax or National Insurance thresholds.
During the election campaign earlier this year, Labour pledged not to raise the rate of income tax.
The income tax personal allowance was frozen at £12,570 and the higher rate threshold at £50,270, from 2022-23 to 2025-26.
The freezes were extended for a further two years in November 2022, when the upper earnings limit and upper profits limit for NICs were also frozen.
This means all these allowances and thresholds were to be frozen until 2027-28.
During her first Budget speech today (30 October), Reeves said the extending the threshold freeze for a further two years would raise “billions of pounds” to deal with the “black hole” in the country’s public finances and “repair public services”.
However, she said: “Having considered this issue closely, I have come to the conclusion that extending the threshold freeze would hurt working people.
“It would take more money out of their payslips. I am keeping every single promise on tax that I made in our manifesto.
“There will be no extension of the freeze in income tax and National Insurance thresholds beyond the decisions by the previous government from 2028-29.”
She said personal tax thresholds will be uprated in line with inflation.
Whatever. It seems that Labour has remained true to form – tax and spend. She will raise £40billion in tax, but if you just roughly tot up what she has stated she will spend that comes to at least £44 billion. Our national debt 2023-24 was £2,690 billion – 98% of GDP – equivalent to £37,900 per person. So with her extra borrowing, how long before the debt is 100% of GDP? In the current financial year we are scheduled to pay around £74 billion in interest on our debt. I wonder if it will stay at this level? Makes her much vaunted black hole look like petty cash.
Growth? Nice thought, but I’m not alone in having doubts. Good luck with getting the work shy back to productive occupations – as long as they are not recruited into the bloated public sector.