Sir Keir Starmer has refused to rule out extending the freeze on income tax thresholds in next week’s budget.
The prime minister said he would not “inflict austerity on the country as they did”, referring to the Conservatives, but did not directly address the speculation that the chancellor may extend the freeze on income tax thresholds beyond 2028.
Asked by Conservative leader Kemi Badenoch whether Rachel Reeves would unveil the measure next week, Sir Keir said: “The budget is one week today and we will lay out our plans.
“I’ve said what we will do in terms of protecting the NHS and public services.
“What we won’t do is inflict austerity on the country as they did. What we won’t do is inflict a borrowing spree like Liz Truss did.”
Ahead of the general election, the Labour Party promised not to increase taxes on “working people”, including national insurance, income tax and VAT.
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It has already been accused of breaking the pledge of national insurance by increasing the amount paid by employers – though Labour said its promise only applied to employees.
While extending the freeze on tax thresholds – dubbed a stealth tax because it drags people into paying higher rates even if their wages increase – would not be a technical breach of the manifesto, it would lead to people paying more personal tax.
The current freeze in thresholds, brought in by the previous Conservative government after the pandemic, is due to expire in 2028.
Pressed on his lack of answer, Ms Badenoch said: “It is quite clear that they are going to freeze thresholds.
“We didn’t get a clear answer from them but this is really important, because in her budget speech last year, the chancellor said, and I quote, ‘I am keeping every single promise on tax that I made in our manifesto’.
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“So, there will be no extension of the freeze in income tax and national insurance thresholds. Why was freezing thresholds a breach of the manifesto last year but it isn’t this year?”
Conservative MPs laughed as the prime minister replied: “Every week she comes along and speculates and distorts.”
Extending the freeze on income tax thresholds is one of the measures that is reportedly being considered by Ms Reeves as she seeks to fill an estimated £30bn hole in the public finances.
Other proposals include a mansion tax – an annual 1% charge on the amount a property’s value exceeds £2m – and a gambling tax that would earn the Treasury about £3.2bn extra a year.
