Her about-turn comes after the Office for Budget Responsibility said the black hole in public finances is closer to £20 billion rather than the £30bn originally feared
Rachel Reeves has found £10bn to save herself from imposing unpopular tax hikes.
The hapless Chancellor yesterday (FRI) dramatically U-turned on her November 26 Budget plan to break a key Labour manifesto pledges by hiking income tax. Her about-turn comes after the Office for Budget Responsibility said the black hole in public finances is closer to £20 billion rather than the £30bn originally feared.
The fiscal watchdog’s improved economic forecasting is understood to have been prompted by the strength of tax receipts. But the Chancellor’s sudden about turn sparked a Lettuce Liz-style market wobble that saw the pound take a hit.
Speculation about the U-turn sparked a sell-off in UK Government bonds, also known as gilts: the means by which the Government borrows money from private investors.
The pound lost 0.38 per cent against the dollar to $1.31 and weakened by 0.37 per cent against the euro to €1.13.
But the gilt market later stabilised as the reasoning behind the Treasury’s decision-making became apparent.
Health Secretary Wes Streeting said: “I’m not in favour of breaking manifesto pledges. It is really important that we keep the promises that we made to the public at the last general election.
“Our economy was broken by the Conservatives, so were our public services, but so was trust in politics itself.
“Our job is to rebuild the economy, rebuild our public services, and rebuild trust in politics.”
But Ms Reeves faces tough choices and other tax rises have not been ruled out.
Income tax thresholds could still be reduced while tax rates are kept the same, a move which could raise billions of pounds for the Treasury.
Downing Street insisted that the thrust of her speech “stands”.
The Prime Minister’s official spokesman said: “She was very clear about the challenges the country faces and her priorities in addressing those challenges. All of that still stands.”
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