Rachel Reeves is faced with a significant budget gap following a recent U-turn on welfare cuts. To address this, she is likely to extend the freeze on income tax thresholds, a strategy that could raise about £8 billion annually. This situation follows Keir Starmer's policy reversal, which has increased pressure on Reeves to either raise taxes or cut expenditure in her autumn budget. Predictions indicate that the number of higher-rate taxpayers will surge as a result of the freeze, while the Office for Budget Responsibility is expected to downgrade growth forecasts.
The freeze on income tax thresholds, initially introduced by Jeremy Hunt, is estimated to raise £8 billion a year and could soon be extended to address growing budget issues.
The U-turn on disability benefits could cost the chancellor as much as £3 billion annually by 2029-30, compounding existing economic pressures.
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