Labour could be plotting tax raid on 1 in 6 Brits later this year

Labour could be plotting a tax raid on one in six earners to prop up the country's finances. Transport Secretary Heidi Alexander appeared to open the door to tax hikes in remarks she made on Sunday (July 13).

Prime Minister Sir Keir Starmer's party promised at the general election that taxes on "working people" wouldn't be increased. But Ms Alexander told Sky News this morning that Labour "made a commitment" in its manifesto "not to be putting up taxes" on people "on modest incomes, working people". Her choice of language appeared to signal a shift in the Government's fiscal approach.

She went on to say the Government hasn't raised income tax, employee National Insurance or VAT, apart from taking away VAT tax reliefs from parents who send their children to private school.

Asked if there will be tax rises in the Autumn budget, Ms Alexander replied: "So, the Chancellor will set her budget. I'm not going to sit in a TV studio today and speculate on what the contents of that budget might be.

"When it comes to taxation, fairness is going to be our guiding principle."

But even if Chancellor Rachel Reeves doesn't announce tax rises in the budget, should she opt to maintain a freeze on income tax thresholds beyond 2027-28 more earners would have to pay more tax.

This means about one in six earners will find themselves in the top tax bracket, up from one in 33 today, according to analysis reported by the Telegraph.

Shadow Home Secretary Chris Philp told Sky News that Ms Alexander's remarks about fairness sounded "like a barely disguised reference to tax rises coming in the autumn".

He added: "They can't get anything past their own back benches. The consequence of all of that is going to be tax rises for people who are working hard and on businesses. It's nothing to do with fairness, it's a symptom of Labour failure."

The current 20% basic rate of income tax applies to incomes up to £37,700. A higher rate of 40% applies to incomes ranging from £37,701 to £125,140. An additional rate for those earning over £125,140 is set at 45%. Those who earn £12,570 or less do not have to pay income tax.

In her Autumn 2024 budget, the Chancellor announced the Government would not extend the freeze to income tax thresholds beyond April 2028.

She said the Government had chosen to protect working people by deciding to not extend the freeze beyond that date.

But Ms Reeves has refused to rule out tax rises at the budget since Labour MPs forced ministers to make a U-turn on welfare reforms, which the Government had hoped would save up to £5billion a year.

Fiscal watchdog the Office for Budget Responsibility (OBR) this week warned the UK's finances are on an "unsustainable" path due to a raft of public spending commitments the Government "cannot afford" in the longer term.

Economists have also warned Ms Reeves on several occasions that her fiscal headroom - the leeway within the Government's self-imposed spending rules - could be eroded by unexpected economic turns.

Lord Kinnock last week suggested a wealth tax could "commend" the Government to the general public and help it bolster public funds while not breaking existing pledges.

Union leaders, including Sharon Graham of Unite, are also pressuring ministers to consider the move.