\n<\/p>\n
Good morning. On Monday last week Rachel Reeves<\/strong>, the chancellor, gave a speech that implied it was all but certain she would break a manifesto promise and raise the main rate of income tax in the budget. Government officials made no attempt to challenge this idea, and some briefings said the decision was \u201cnailed on\u201d.<\/p>\n Only it wasn\u2019t. There has been a U-turn. The news was broken by the Financial Times last night, in a story saying Reeves and Keir Starmer have have \u201cditched their manifesto-busting plan to increase income tax rates, in a dramatic U-turn ahead of the budget\u201d. The Guardian was soon able to confirm the story and here is our report by Jessica Elgot<\/strong>, Pippa Crerar <\/strong>and Peter Walker<\/strong>.<\/p>\n As the story explains, a U-turn on this scale may be hard to explain.<\/p>\n Downing Street and the Treasury have been preparing the ground for weeks with Labour MPs for a breach of the manifesto. In particular, it has been stressed to Labour MPs that they should not speak out against the budget because of the effect any potential measures might have on the bond markets and the UK\u2019s borrowing costs.<\/p>\n That message to MPs is likely to ring hollow if the chancellor has U-turned after days of internal warfare over a potential challenge to the prime minister\u2019s leadership and the spotlight on briefings against the health secretary, Wes Streeting.<\/p>\n This is all happening less than a fortnight before the budget, which is taking place on Wednesday 26 November.<\/p>\n Here are the main developments on this story this morning.<\/p>\n Lisa Nandy, the culture secretary, has not denied the FT scoop.<\/strong> But, in an interview on Sky News, she rejected suggestions that the reported U-turn made the government look chaotic.<\/p>\n<\/li>\n<\/ul>\n Kemi Badenoch, the Conservative leader, has welcomed the reports saying the proposed rise in income tax has been ditched.<\/strong> On social media, commenting on a link to the FT story, she said:<\/p>\n<\/li>\n<\/ul>\n Good. (If true).<\/p>\n Only the Conservatives have fought Labour off their tax-raising plans. But one retreat doesn\u2019t 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.<\/p>\n We\u2019re getting some market moves as investors digest Rachel Reeves\u2019 change in plans on income tax ahead of the autumn budget.<\/p>\n In the bond market, the yield on the UK\u2019s 30-year gilt<\/strong> is up 12 basis points,<\/strong> suggesting there is a perception of growing risk to the fiscal position.<\/p>\n The yield on the 20-year gilt<\/strong>, meanwhile, was sitting at 5.225%, also up 12 basis points<\/strong> on the day<\/p>\n Reuters says this is putting long-dated gilts on track for their worst day since July 2, when a Reeves\u2019 tearful appearance in parliament spooked investors.<\/p>\n This is from Faisal Islam<\/strong>, the BBC\u2019s economics editor.<\/p>\n Kalyeena has more on this here.<\/p>\n And, in response, the Conservative have accused Reeves of \u201crattling the markets\u201d. This is from Kevin Hollinrake<\/strong>, the Tory chair.<\/p>\n<\/li>\n<\/ul>\n What Rachel Reeves fails to grasp is that this constant \u2018will she, won\u2019t she\u2019 briefing is rattling the markets and undermining business confidence.<\/p>\n It\u2019s bad for growth, bad for investment and bad for jobs.<\/p>\n The country is paying the price for her indecision.<\/p>\n Here is the agenda for the day.<\/p>\n 9am:<\/em> Wes Streeting, the health secretary, takes part in an LBC phone-in.<\/p>\n 10am:<\/em> Peers start the committee stage debate of the assisted dying bill.<\/p>\n 11.30am:<\/em> Downing Street holds a lobby briefing.<\/p>\n Morning:<\/em> Kemi Badenoch is on a visit in Essex.<\/p>\n If you want to contact me, please post a message below the line when comments are open (normally between 10am and 3pm at the moment), or message me on social media. I can\u2019t read all the messages BTL, but if you put \u201cAndrew\u201d in a message aimed at me, I am more likely to see it because I search for posts containing that word.<\/p>\n If you want to flag something up urgently, it is best to use social media. You can reach me on Bluesky at @andrewsparrowgdn.bsky.social. The Guardian has given up posting from its official accounts on X, but individual Guardian journalists are there, I still have my account, and if you message me there at @AndrewSparrow, I will see it and respond if necessary.<\/p>\n I find it very helpful when readers point out mistakes, even minor typos. No error is too small to correct. And I find your questions very interesting too. I can\u2019t promise to reply to them all, but I will try to reply to as many as I can, either BTL or sometimes in the blog.<\/p>\n Share<\/p>\n Updated at\u00a004.28 EST<\/p>\n <\/span><\/span><\/p>\n Key events<\/p>\n <\/span>Show key events only<\/p>\n Please turn on JavaScript to use this feature<\/span><\/p>\n <\/span><\/p>\n When Wes Streeting<\/strong> did a media round on Wednesday morning, after No 10 briefing that implicitly accused him of plotting against Keir Starmer, he was mostly supportive of Starmer and the government. But he included some criticism, including a subtle hint than he thought breaking the manifesto promise on income tax would be a mistake.<\/p>\n This morning he has said it out loud. This is what he told listeners during his LBC phone-in this morning when asked about the budget U-turn story.<\/p>\n I\u2019m not in favour of breaking manifesto pledges. I think that trust in politics and politicians is low and it\u2019s part of our responsibility to not only rebuild our economy and rebuild our public services, but to rebuild trust in politics itself.<\/p>\n The fact that the chancellor \u2013 and we\u2019re going on speculation here \u2013 but the fact that the chancellor was reported as even considering breaking manifesto commitments tells you two things: Firstly, the public finances are under real pressure, and secondly she is fundamentally, unequivocally, committed to her fiscal rules and so therefore she\u2019s got some invidious choices to make, and she\u2019s weighing those up.<\/p>\n I\u2019ve not spoken to the chancellor overnight. I\u2019ve seen the reports this morning that she\u2019s no longer planning to increase income tax.<\/p>\n I think what the news overnight has shown is that people speculate on the budget but ultimately you don\u2019t know what\u2019s in it until the day it\u2019s delivered, and that includes the cabinet, by the way. So we will all have to wait and see.<\/p>\n On this issue, on Wednesday, Streeting certainly gave the impression of being ahead of the curve. That may be one reason why has ended the week as the clear favourite in the betting markets to replace Keir Starmer as Labour leader.<\/p>\n Share<\/p>\n Luke Tryl<\/strong>, the More in Common pollster, says on Bluesky he can understand why Rachel Reeves thought twice before breaking Labour\u2019s manifesto promise on tax.<\/p>\n Too much analysis was still treating breaking the tax pledge as \u201cjust another unpopular decision\u201d rather than recognising consequence of breaking a promise which defined an election for the public. If is correct the govt won\u2019t now break it they may have avoided a deeply scarring loss of public trust<\/p>\n This is not about tax (I remain convinced Labour could have pledged to reverse hunts NI rises and still won comfortably). But breaking a pledge which was so central to labours offer at a time when trust already fragile, and the public won\u2019t buy circs have changed (this isn\u2019t like the pandemic).<\/p>\n Share<\/p>\n While Alex Wickham from Bloomberg reports that a better-than-expected fiscal forecast has allowed Rachel Reeves to drop the plan to raise income tax in the budget (see 9.03am), other explanations are also being offered. This is from an analysis from Beth Rigby<\/strong>, Sky News\u2019s political editor.<\/p>\n I understand Downing Street has backed down amid fears about the backlash from disgruntled MPs and voters.<\/p>\n Share<\/p>\n This is from Helen Miller<\/strong>, director of the Institute for Fiscal Studies thinktank, on the market reaction to the chancellor\u2019s reported budget U-turn.<\/p>\n Investors will have 2 broad concerns about news that Chancellor won\u2019t increase income tax rates<\/p>\n 1. Does it signal less willingness to do politically difficult things<\/p>\n 2. Will alternative tax increase be more damaging to growth<\/p>\n Yes to either will push up on govt borrowing costs<\/p>\n Share<\/p>\n Speculation the chancellor has scrapped plans to raise income tax sparked a sell-off in UK government bonds amid fears over unfunded spending pledges, PA Media reports. PA says:<\/p>\n Britain\u2019s long-term borrowing costs were sent soaring as reports suggested the latest U-turn would leave Rachel Reeves scrambling to fill a gaping black hole in the nation\u2019s finances just two weeks before the 26 November budget.<\/p>\n Yields on 30-year UK government bonds, also known as gilts, jumped as much as 14 basis points in early trading, and the yield on 10-year gilts also shot up 12 basis points \u2013 rising the most since July.<\/p>\n The yield moves counter to the price of bonds, meaning that prices fall when yields rise.<\/p>\n Yields later eased back a little, with 30-year gilt yields standing seven basis points higher at 5.3% and 10-year gilt yields up six basis points at 4.5%.<\/p>\n Sterling initially fell on the political concerns swirling around the budget, falling 0.3% against the US dollar and euro, before later regaining its poise to remain largely flat at 1.32 US dollars and 1.13 euros.<\/p>\n Kalyeena Makortoff<\/strong> has more on this on our business live blog.<\/p>\n Share<\/p>\n These are from Ben Zaranko<\/strong>, an economist at the Institute for Fiscal Studies, on the chancellor\u2019s U-turn, and in particular on the FT\u2019s claim that, instead of putting up income tax, she will \u201crely heavily on what has been dubbed the \u2018smorgasbord\u2019 approach of increasing a range of narrowly-drawn taxes\u201d.<\/p>\n Considerable risks with this approach: 1) revenues more uncertain; 2) greater risk of damaging economic impacts; 3) lots of angry interest groups, makes U-turns more likely; 4) viewed less favourably by bond market investors, many of whom were expecting an income tax rise.<\/p>\n But on the flip side, it could allow a Budget that doesn\u2019t strictly break manifesto promises (which isn\u2019t a trivial concern given low trust in politicians). It is possible to raise tens of billions without raising rates of the big 3 taxes. It\u2019s just really, really difficult.<\/p>\n Here\u2019s an extraordinarily cynical take: did the government talk up the likelihood of a manifesto-breaking income tax rise in the knowledge that it would push down gilt yields in the window the OBR will use for its forecasts?<\/p>\n Share<\/p>\n This is from Kevin Schofield<\/strong> from HuffPost UK this morning.<\/p>\n Senior Labour source: \u201cKeir and Rachel – in office, but not power.\u201d<\/p>\n Share<\/p>\n This morning a Treasury spokesperson<\/strong> issued this statement in response to the reports that Rachel Reeves has abandoned plans to raise income tax in the budget.<\/p>\n We do not comment on speculation around changes to tax outside of fiscal events. The chancellor will deliver a budget that takes the fair choices to build strong foundations to secure Britain\u2019s future.<\/p>\n Share<\/p>\n Alex Wickham<\/strong> from Bloomberg is reporting that Rachel Reeves dropped her plan to raise income tax in the budget after the fiscal forecast improved. He says:<\/p>\n Rachel Reeves received an improved fiscal forecast from her budget watchdog putting the fiscal hole at \u00a320 billion, leading her to drop plans to raise income tax rates, people familiar with the matter said.<\/p>\n The latest update from the Office for Budget Responsibility moved in a significantly better direction due to the strength of receipts and stronger wage performance.<\/p>\n As well as filling the \u00a320 billion gap, Reeves is still expected to deliver headroom against her fiscal rules of between \u00a315 billion and \u00a320 billion.<\/p>\n An expected productivity downgrade from the OBR has been partially countered, the people said.<\/p>\n Wickham also says, on the basis of what he has been briefed, that Reeves \u201cwill likely lower income tax thresholds at the budget [see 8.57am] and raise significant taxes from salary sacrifice schemes\u201d.<\/p>\n Share<\/p>\n The Treasury has now triggered speculation that, to compensate for not rising the basic rate of income tax, it will have to bring down the threshold at which people start paying higher rates.<\/p>\n In its story the Financial Times says:<\/p>\n The chancellor is now exploring alternative ways to fill a fiscal hole estimated by economists to be up to \u00a330bn.<\/p>\n One option to raise revenue would involve cutting the thresholds at which people pay different rates of income tax, while leaving the headline basic and higher rates of the tax unchanged.<\/p>\n Reeves was pictured leaving Downing Street earlier this month with her diary on display, with a single word written in relation to a meeting: \u201cThresholds.\u201d<\/p>\n Rachel Reeves and Keir Starmer were nervous about putting up the main rate of income tax because that would have been a direct breach of the Labour manifesto, which said:<\/p>\n Labour will not increase taxes on working people, which is why we will not increase national insurance, the basic, higher, or additional rates of income tax, or VAT.<\/p>\n But Labour has already increased employer national insurance, which was seen by many as a breach of this pledge. Reeves is expected to extend the freeze in income tax thresholds and this would increase the amount of income tax people pay, although technically it would not be a breach of the manifesto if the manifesto is understood as referring just to headline rates.<\/p>\n Bringing down thresholds would also be seen as a breach of the spirit of the manifesto, if not the letter of it.<\/p>\n Share<\/p>\n Stephen Flynn<\/strong>, the SNP leader at Westminster, says the latest news about the budget shows the government is in chaos. In a statement this morning, he said:<\/p>\n This isn\u2019t government, this is chaos. <\/p>\n Labour give the impression of a party that has completely lost control – playing a dangerous game with people\u2019s finances so that their prime minister can try to cling to power. <\/p>\n But everyone now knows the clock is ticking until he is dumped from Downing Street. His last act should not be to play fast and loose with the public finances – they\u2019ve already more than paid the price for the constant chaos and crisis that passes for politics at Westminster. <\/p>\n Share<\/p>\n This is from Daisy Cooper<\/strong>, the Liberal Democrat Treasury spokesperson and deputy leader, on the reported budget income tax U-turn.<\/p>\n If true, this 11th hour screeching u-turn might just spare struggling families from yet another punch in the stomach Budget.<\/p>\n The Chancellor should look at our plan for a windfall tax on the big banks\u2019 billions in profits and put \u00a3270 back into people\u2019s pockets.<\/p>\n Share<\/p>\n Good morning. On Monday last week Rachel Reeves<\/strong>, the chancellor, gave a speech that implied it was all but certain she would break a manifesto promise and raise the main rate of income tax in the budget. Government officials made no attempt to challenge this idea, and some briefings said the decision was \u201cnailed on\u201d.<\/p>\n Only it wasn\u2019t. There has been a U-turn. The news was broken by the Financial Times last night, in a story saying Reeves and Keir Starmer have have \u201cditched their manifesto-busting plan to increase income tax rates, in a dramatic U-turn ahead of the budget\u201d. The Guardian was soon able to confirm the story and here is our report by Jessica Elgot<\/strong>, Pippa Crerar <\/strong>and Peter Walker<\/strong>.<\/p>\n As the story explains, a U-turn on this scale may be hard to explain.<\/p>\n Downing Street and the Treasury have been preparing the ground for weeks with Labour MPs for a breach of the manifesto. In particular, it has been stressed to Labour MPs that they should not speak out against the budget because of the effect any potential measures might have on the bond markets and the UK\u2019s borrowing costs.<\/p>\n That message to MPs is likely to ring hollow if the chancellor has U-turned after days of internal warfare over a potential challenge to the prime minister\u2019s leadership and the spotlight on briefings against the health secretary, Wes Streeting.<\/p>\n This is all happening less than a fortnight before the budget, which is taking place on Wednesday 26 November.<\/p>\n Here are the main developments on this story this morning.<\/p>\n Lisa Nandy, the culture secretary, has not denied the FT scoop.<\/strong> But, in an interview on Sky News, she rejected suggestions that the reported U-turn made the government look chaotic.<\/p>\n<\/li>\n<\/ul>\n Kemi Badenoch, the Conservative leader, has welcomed the reports saying the proposed rise in income tax has been ditched.<\/strong> On social media, commenting on a link to the FT story, she said:<\/p>\n<\/li>\n<\/ul>\n Good. (If true).<\/p>\n Only the Conservatives have fought Labour off their tax-raising plans. But one retreat doesn\u2019t 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.<\/p>\n We\u2019re getting some market moves as investors digest Rachel Reeves\u2019 change in plans on income tax ahead of the autumn budget.<\/p>\n In the bond market, the yield on the UK\u2019s 30-year gilt<\/strong> is up 12 basis points,<\/strong> suggesting there is a perception of growing risk to the fiscal position.<\/p>\n The yield on the 20-year gilt<\/strong>, meanwhile, was sitting at 5.225%, also up 12 basis points<\/strong> on the day<\/p>\n Reuters says this is putting long-dated gilts on track for their worst day since July 2, when a Reeves\u2019 tearful appearance in parliament spooked investors.<\/p>\n This is from Faisal Islam<\/strong>, the BBC\u2019s economics editor.<\/p>\n Kalyeena has more on this here.<\/p>\n And, in response, the Conservative have accused Reeves of \u201crattling the markets\u201d. This is from Kevin Hollinrake<\/strong>, the Tory chair.<\/p>\n<\/li>\n<\/ul>\n What Rachel Reeves fails to grasp is that this constant \u2018will she, won\u2019t she\u2019 briefing is rattling the markets and undermining business confidence.<\/p>\n It\u2019s bad for growth, bad for investment and bad for jobs.<\/p>\n The country is paying the price for her indecision.<\/p>\n Here is the agenda for the day.<\/p>\n 9am:<\/em> Wes Streeting, the health secretary, takes part in an LBC phone-in.<\/p>\n 10am:<\/em> Peers start the committee stage debate of the assisted dying bill.<\/p>\n 11.30am:<\/em> Downing Street holds a lobby briefing.<\/p>\n Morning:<\/em> Kemi Badenoch is on a visit in Essex.<\/p>\n If you want to contact me, please post a message below the line when comments are open (normally between 10am and 3pm at the moment), or message me on social media. I can\u2019t read all the messages BTL, but if you put \u201cAndrew\u201d in a message aimed at me, I am more likely to see it because I search for posts containing that word.<\/p>\n If you want to flag something up urgently, it is best to use social media. You can reach me on Bluesky at @andrewsparrowgdn.bsky.social. The Guardian has given up posting from its official accounts on X, but individual Guardian journalists are there, I still have my account, and if you message me there at @AndrewSparrow, I will see it and respond if necessary.<\/p>\n I find it very helpful when readers point out mistakes, even minor typos. No error is too small to correct. And I find your questions very interesting too. I can\u2019t promise to reply to them all, but I will try to reply to as many as I can, either BTL or sometimes in the blog.<\/p>\n Share<\/p>\n Updated at\u00a004.28 EST<\/p>\n","protected":false},"excerpt":{"rendered":" Reeves accused of \u2018rattling the markets\u2019 after income tax U-turn pushes up borrowing costs Good morning. On Monday last week Rachel Reeves, the chancellor, gave a speech that implied it was all but certain she would break a manifesto promise and raise the main rate of income tax in the budget. Government officials made no<\/p>\n","protected":false},"author":1,"featured_media":33484,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[48],"tags":[2124,5171,305,5607,132,2884,124,2309,10467,2656,101,14051],"class_list":{"0":"post-33483","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-politics","8":"tag-accused","9":"tag-borrowing","10":"tag-costs","11":"tag-income","12":"tag-live","13":"tag-markets","14":"tag-politics","15":"tag-pushes","16":"tag-rattling","17":"tag-reeves","18":"tag-tax","19":"tag-uturn"},"_links":{"self":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/33483","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=33483"}],"version-history":[{"count":0,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/33483\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/media\/33484"}],"wp:attachment":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=33483"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=33483"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=33483"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n
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‘I’m not in favour of breaking manifesto pledges’ – Streeting suggests Reeves right to ditch budget plan to raise income tax<\/h2>\n
UK government borrowing costs still up after budget U-turn report, but initial spike has eased<\/h2>\n
SNP says Labour acting like it’s ‘completely lost control’ and Starmer on his way out<\/h2>\n
Lib Dems welcome reported ‘screeching U-turn’ on income tax, and urge Reeves to tax banks more<\/h2>\n
Reeves accused of \u2018rattling the markets\u2019 after income tax U-turn pushes up borrowing costs<\/h2>\n
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