Some Labour Party members reportedly advised Rachel Reeves to reconsider the party’s manifesto commitments to avoid a potential budget that could rely on multiple smaller revenue-raising measures, which could be perceived unfavorably. Tensions within the government have emerged as the Office for Budget Responsibility (OBR) presented its first fiscal forecast to the Treasury.
Labour’s manifesto from last year included assurances not to raise national insurance, VAT, or income tax, which together represent approximately 75% of tax revenue. Reports indicate that some in Downing Street fear the manifesto pledges could hinder effective budget planning, suggesting it might become disjointed.
Despite these concerns, colleagues assert that Reeves remains committed to the manifesto and has not requested cost analyses for potential tax increases that would breach these commitments in the upcoming budget. The OBR has reportedly provided Reeves with a more pessimistic growth forecast, leading to expectations that she may face a budget shortfall of £20bn to £40bn compared to her earlier fiscal projections.
The Treasury believes it can mitigate the impact of this financial gap by engaging the OBR on the potential positive effects of government growth policies. During Labour’s recent conference, Keir Starmer’s chief secretary Darren Jones indicated that the manifesto was still relevant, as final decisions have yet to be made.
Potential tax measures under consideration include increasing income and national insurance tax rates, though raising VAT is seen as less likely due to inflation concerns. There are also discussions about tax implications for landlords and wealthy individuals leaving the country. Some business leaders reportedly prefer a more straightforward increase in personal taxes over numerous smaller adjustments.
While past budget failures, such as the 2012 “pasty tax,” are referenced, strategists suggest broader tax increases might be more palatable to voters than a series of minor changes. The Labour government faces pressure to address long-standing tax system criticisms, and discussions about significant reforms appear to be constrained by timelines and practicalities.
Source: https://www.theguardian.com/uk-news/2025/oct/04/rachel-reeves-urged-to-break-manifesto-pledges-to-avoid-pasty-tax-budget