Pressure on Holyrood

Reeves ponders tax cuts in Labour’s manifesto

Rachel Reeves
Rachel Reeves: Labour plans to be aspirational (pic: Terry Murden)

Labour’s shadow Chancellor Rachel Reeves is looking to introduce cuts to income tax or national insurance to show that the party’s support for “aspiration”.

Senior figures say tax cuts should be measured and costed but would also be a vital indication of the party’s empathy with those still struggling with the cost of living.

Ms Reeves believes working people in the UK pay too much tax and that it needs to come down to help stimulate economic growth but it should not threaten the party’s credibility for fiscal responsibility.

Sources say Labour wants to go head to head on tax with the Conservative party which is said to pursuing plans to axe inheritance tax. Labour says this will favour the wealthy and is the wrong priority.

With both main parties promising some tax cuts, pressure will mount on the Scottish Government which is raising income taxes and therefore widening the gulf between Scotland and rest of the UK.

Darren Jones, Labour;’s shadow chief secretary to the Treasury, told Times Radio that Labour wanted to cut taxes for working people.

“What we’ve not been coy about is the tax burden is higher than it has been for a very long time. We want taxes to come down on working people. That’s why we supported the cuts,” he said.

Ms Reeves has already ruled out introducing wealth taxes to raise money, including a mansion tax on expensive properties or increasing rates charged on capital gains from shareholdings and property. She has also ruled out increasing the top rate of income tax.

The Tories have criticised Labour’s plans to borrow £28 billion to spend on green investment though there have been questions within Labour over whether it will stick to the pledge.

In the Scottish Budget last month the Scottish Finance Secretary Shona Robison introduced a new 45p tax band for those earning between £75,000 and £125,140. The top rate of tax for the highest earners is increasing from 47p to 48p. These policies affect the top 5% of taxpayers in Scotland.

The threshold for the starter and basic rate will be increased by inflation but the band for paying the higher rate tax (42p) will be kept at £43,662. Freezing the higher rate threshold next year will add an estimated £307m to income tax.

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