Rachel Reeves is reportedly U-turning on plans to break Labour’s manifesto pledge and raise income tax at the Budget. The news comes after a fiery debate on BBC Question Time, where politicians butted heads over whether raising taxes was necessary for public services to improve. Former Conservative minister Ken Clarke said the Chancellor has to be “unpopular” and “raise taxation as we need more revenue”. “We have a terrible, terrible debt problem; we cannot carry this burden of bread very much further. It will crash,” he said, adding that it is in the “national interest” to both “cut public expenditure” and “raise taxation substantially”.

However, Reform MP Danny Kruger said “it isn’t the case” that we need to raise taxes to see improved services. “We’ve been pouring more and more money into the public sector for years, and productivity is declining… Outcomes are worse, and that is because we have a system which needs proper reform.” On Wednesday, it emerged that Ms Reeves has changed her mind on raising taxes due to fears the move could spark a backlash from voters and backbench Labour MPs.

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The Chancellor’s new decision was communicated to the Office for Budget Responsibility on Wednesday, when the Chancellor submitted a list of “major measures” to be included in her Budget on November 26, according to the Financial Times.

An income tax hike would aim to help fill a £ 50 billion black hole in public finances, but it would breach Labour’s manifesto promise not to increase income tax, National Insurance, or VAT.

Instead of the contentious tax hike, the Treasury is now considering reducing the income tax thresholds at which people start paying different rates. Extending the freeze on income tax thresholds, initially introduced by the Conservatives, was already one of the options on the table for the upcoming Budget. The newspaper revealed that a “smorgasbord” of smaller measures is currently being explored.

Kemi Badenoch, the Conservative leader, took to X to voice her approval of the reported U-turn, stating it was “good (if true).” However, she added, “But one retreat doesn’t fix a Budget built on broken promises. Reeves must guarantee no new taxes on work, businesses, homes or pensions – and she should go further by abolishing stamp duty.”