RACHEL Reeves is considering slapping 2 pence on income tax in what would be a massive breach of Labour’s manifesto.
The Chancellor is thinking of “going big” and raising many billions of pounds with one big tax bomb rather than lots of smaller hikes.
She is scrambling to raise about £30 billion to plug her shortfall as Britain’s stuttering economy continues to struggle.
A senior Labour minister said: “Income tax could go up – they are looking at 2 pence. It would raise a lot of money.”
Slapping 2 pence on the basic rate of income tax would raise about £20 billion.
But it would be a clear breach of the Labour’s election manifesto which states: “We will not increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT.”
Some critics say Labour have already broken the manifesto by hiking National Insurance contributions on employers.
But Team Reeves deny this, claiming that because it only hit employer contributions and not workers directly it did not break the pledge.
The Treasury is also expected to scrap the 5 pence cut to fuel duty, which was brought in as a “temporary” measure on Covid.
The Budget is on November 26, and the final plans have not been submitted yet.
But taxes will definitely be hiked. Economists have warned Britain is at risk of a stagflation crisis thanks to poor growth and climbing inflation.
A Treasury source said they do not get into Budget speculation
He added: “The manifesto stands.”