Financial markets grow fretful after reports of UK government abandoning income tax hike
LONDON AP British financial assets were under pressure Friday on growing speculation that the Labour cabinet has ditched plans to raise income taxes in a crucial budget at the end of the month Treasury chief Rachel Reeves was clearly considering becoming the first Chancellor of the Exchequer in years to increase the basic rate of income tax But widespread reports say she has decided against it causing investors to grow nervous over the uncertain budget process By late afternoon London time the pound was lower at while the yield or interest rate on the British regime s benchmark -year bond was up percentage point at The increase in the yield is particularly illustrative as it shows that investors are demanding a bigger return on their bond holdings a clear sign that they are fretting about the outlook for the U K s citizens finances and the governing body s ability to act boldly over fears higher income taxes would anger voters This episode demonstrates the importance of the budget as a test of field confidence in the U K ruling body s fiscal approach reported Deutsche Bank s chief U K economist Andrew Goodwin If the cause is political with the authorities concerned about how voters will react to income tax hikes it may strengthen perceptions that the executive lacks the appetite to take tough fiscal decisions he added It s a high-stakes time for the ruling body which is languishing in the opinion polls barely a year-and-a-half after coming to power and Prime Minister Keir Starmer s favorability ratings deep in negative territory Reeves had been expected to hike the main income tax rate in her budget on Nov which would break Labour s central pledge in its manifesto ahead of last year s general poll which saw the party sweep back to power after years Reeves has been laying the ground for tax rises over current weeks and as of late as Monday she indicated that the alternative to developing the manifesto pledge would be deep cuts to community outlay Wes Streeting the strength secretary who earlier this week was being briefed by supposed allies to Starmer welcomed reports that the income tax has been abandoned partly because it would have further undermined trust in politics as a whole It is really key that we keep the promises that we made to the citizens at the last general electoral contest he declared In newest days Reeves received updated forecasts from the independent Office for Budget Responsibility An improvement would lessen the need for Reeves to raise as much as money as she had been planning for and experts say stronger wage expansion in up-to-date months will mean higher taxes coming into the Treasury The British market system the sixth-largest in the world has underperformed its long-run average since the global financial situation of - and the center-left Labour regime elected in July has struggled to deliver the economic increase it commented was its driving mission Inflation remains stubbornly high and expansion sluggish frustrating efforts to repair tattered residents services and ease the cost of living Source
