Downing Street has refuted allegations that Rachel Reeves, ahead of this week's Budget, misrepresented the condition of the public finances. The Conservative party accused Reeves of portraying an excessively pessimistic outlook, which they described as a "smokescreen" to enable tax increases, with Kemi Badenoch calling for her removal.
The Office for Budget Responsibility (OBR) subsequently confirmed a downgrade in productivity, yet it also predicted that this effect would be compensated by increased wages, leading to higher government tax revenues. Despite these OBR projections, Reeves continued to suggest a potential need for income tax rate increases, citing "weaker than previously thought" productivity performance and stressing the prevailing economic challenges.
Ultimately, Reeves did not implement direct income tax rate hikes in the Budget. However, the Budget did contain £26bn of other tax rises, including a decision to freeze income tax thresholds for an additional three years. Conservative Shadow Chancellor Sir Mel Stride noted that while Reeves frequently mentioned the productivity downgrade, she "failed to mention" the offsetting positive impact of higher wages on revenue forecasts.
Source: https://www.bbc.com/news/articles/c4gex225p5jo?at_medium=RSS&at_campaign=rss