The Chancellor said she is planning for the years ahead and has more work to do
Chancellor Rachel Reeves won’t resign (Image: Kirsty O’Connor / Treasury)
Chancellor Rachel Reeves has vowed to stay in her job for years to come, despite calls for her resignation after she increased taxes by £26 billion. Labour’s general election manifesto last year included a promise that the party “will not increase taxes on working people”. But in her Budget this week, Ms Reeves imposed a range tax hikes including forcing almost a million more people to pay the 40% higher rate of income tax.
Despite this, she told an interviewer this morning that she would not quit. The Chancellor told Times Radio: “I have defied the forecasts this year.” She continued: “I’m going to defy those forecasts next year and the year after that.” And Ms Reeves insisted she had “plenty more” to do. She said: “Lots of people have tried to write me off over the last 16 months. And you’re not going to write my obituary today. There’s plenty more that I’m going to do to grow our economy and make working people better off.”
Conservatives have demanded the Chancellor resign following her tax-raising Budget. Conservative leader Kemi Badenoch told the House of Commons on Wednesday: “Iy is a total humiliation. Last year, the Chancellor put up taxes by £40 billion – the biggest tax raid in British history. She promised that she would not be back for more. She swore that it was a one-off. She told everyone that from now on, there would be stability and she would pay for everything with growth.
“Today, she has broken every single one of those promises. If she had any decency, she would resign. At the last Budget, she said she was proud to be the country’s first-ever female Chancellor; after this Budget, she will go down as the country’s worst-ever Chancellor.”
Ms Reeves has insisted she actually kept her promises, but this claim was rejected by leading independent think tank the Institute for Fiscal Studies. In an overview of the Budget, the think tank said: “Because it includes a freeze in National Insurance thresholds, it also breaches the government’s manifesto tax promise not to increase National Insurance.”
The IFS said: “As the Chancellor acknowledged, it clearly represents a tax rise on working people.”
Ms Reeves froze income tax and National Insurance thresholds for another three years. Explaining how this works, Treasury watchdog the Office for Budget responsibility said: “Freezing thresholds, rather than raising them in line with inflation, increases tax receipts as rising wages tip ever greater numbers of workers into the tax system or onto higher rates, which is known as ‘fiscal drag’.”
The Chancellor’s Budget announcements mean an extra 780,000 people on low incomes will have to pay income tax when they would previously have been spared, and an extra 920,000 people currently paying the 20% rate will now be charged 40% on part of their income.
In other changes, the Chancellor increased taxes paid by working people on pension contributions by £4.7 billion. A new road tax on electric cars will raise £1.4 billion from drivers, and changes to student loan repayments mean working graduates will pay an extra £400 million.
