Treasury won’t cut threshold for higher rate income tax, say sources – UK politics live | Politics

This is from Pippa Crerar, the Guardian’s political editor, on where we stand this morning after all the fallout from the budget income tax U-turn. She confirms that sources are now ruling out cutting the thresholds for paying higher rates of income tax.

She says government insiders claim the change is all down to better-than-expected fiscal forecasts, and that Labour opposition to the proposal was not a factor.

Where we are on budget after revelation Rachel Reeves will no longer hike income tax rates

– Treasury confirms that stronger than expected OBR forecasts means fiscal gap is closer to £20bn than previously speculated £30-£40bn. Reeves also wants headroom of around £15bn in addition.

– This means Reeves does not need to become first chancellor in 50 years to raise basic rate on income tax – breaching a central manifesto promise.

– Improved forecasts are result of stronger wage growth (and therefore higher tax receipts) which started to feed into figures last week.

– But £20bn is still big number – so expect income tax thresholds to be frozen for another two years, taxes on salary sacrifice schemes, fuel duty equivalent for electric vehicles – plus ‘smorgasbord’ of other measures.

– As per previous post, I’m told that income tax thresholds will not be cut, despite speculation.

– Govt insiders say decision to drop income tax plan is nothing to do with political fall-out after Reeves publicly signalled manifesto breach – causing huge anxiety among Labour MPs (which ultimately fed into No 10’s extraordinary attempts to shore up PM).

– They defend decision to ‘roll the pitch’ on income tax rises – saying at that point they thought it might be necessary and leaving it to just before budget would’ve spooked MPs and markets.