Uncertainty remains over government’s tax plans ahead of Autumn Budget
Keir Starmer has refrained from reaffirming Labour’s previous commitment not to raise VAT, income tax, or national insurance in the forthcoming Budget, citing challenging economic conditions.
During Prime Minister’s Questions, he stated that the government would “lay out our plans” at the Budget statement scheduled for Nov. 26, attributing the country’s economic difficulties to the former Conservative administration.
The Prime Minister did not repeat Labour’s pre-election assurance that these taxes would remain unchanged, nor did his press secretary confirm the pledge when questioned. He also avoided giving a clear answer on whether the freeze on the personal tax allowance threshold would be extended, a measure that increases the number of individuals paying income tax.
These developments have heightened expectations that Chancellor Rachel Reeves may introduce further tax increases to address a significant shortfall in government finances.
Conservative leader Kemi Badenoch pressed Starmer on his position, asking, “what’s changed in the past four months?” The Prime Minister responded that no government would announce its fiscal plans in advance, and pointed to recent economic data, including higher-than-expected retail sales, lower inflation, and an upgraded growth forecast.
Income Tax. VAT. National Insurance.
— Kemi Badenoch (@KemiBadenoch) October 29, 2025
Four months ago, the PM ruled out raising these taxes. Today, he won’t.
Why? Because Labour’s high taxes and out-of-control spending have wrecked the economy, and they're coming back for more. Nobody voted for this. pic.twitter.com/XEJlFubaVM
The Institute for Fiscal Studies has estimated that Reeves may need to identify £22 billion in tax increases or spending reductions to restore the fiscal headroom outlined earlier in the year. This gap is attributed to increased borrowing costs, persistent inflation, and slower economic growth, as well as new spending commitments.
Reports suggest that the Office for Budget Responsibility is preparing to lower its productivity forecasts, which could further widen the fiscal gap. Each percentage point reduction in productivity forecasts is estimated to require an additional £7 billion in measures to meet fiscal targets.
Within Labour, some senior figures are reportedly urging Reeves to consider raising income tax, arguing it could generate significant revenue without provoking concentrated opposition. However, others in the party are concerned that such a move would break a key election promise and could further dampen economic growth.
Want to be regularly updated with mortgage news and features? Get exclusive interviews, breaking news, and industry events in your inbox – subscribe to our FREE daily newsletter. You can also follow us on Facebook, X (formerly Twitter), and LinkedIn.
