Rachel Reeves hikes income tax by stealth - then claims she's kept her promises

Before the Budget, Rachel Reeves indicated that she would increase income tax, then did a U-turn and said she wouldn’t. Today, she did increase the amount of income tax we'll all pay, but she did it by stealth. Most analysts assumed she’d extend the freeze on income tax thresholds, which is already set to continue to 2028. Everyone expect her to freeze them for two more years to 2030. But she went further. Now it will run for an extra three years until 2031.

That will cost taxpayers around £8.3billion extra each year, which adds up to almost £25billion extra income tax in total. That’s on top of the £42billion the freeze was originally slated to cost when it was due to end in 2028.

There was no mention of extending the freeze in the election. No mention in the manifesto, where Reeves pledged she wouldn’t hike income tax, national insurance (NI) or VAT.

In fact, in last year's Budget Reeves made a virtue of not extending the freeze, saying she was protecting working people by doing so. And now she's done it anyway – by three more years. It will now run for nine years in total.

Yet today she boasted that she’d kept “every single one of our manifesto commitments”. As if.

She already broke one last year, hiking NI by £25billion, but did it by slapping the bill on employers rather than individuals. Workers still paid the price through lost jobs, low salary hikes and higher prices in the shops. And now she's broken a second, while playing with words.

The impact will be the same though, as more money will come out of our wallets.

The extended income tax freeze means more than 40million people will pay income tax, including many pensioners.

Millions will be dragged into higher tax brackets. Once upon a time, paying 40% was only for the wealthy. Soon, close to 10million people will pay it. These are working people, the group Labour claimed it was elected to protect.

And she didn’t stop there. She also extended the freeze on inheritance tax bands, and went after our homes, savings, motorists and pension contributions.

What she didn’t do was take any meaningful steps to cut the cost of the spiralling welfare bill.

Spending on sickness and disability benefits is set to jump to £109billion by 2030-31, blowing a hole in her hopes of rebuilding Britain’s standing with bond markets.

Total welfare spending is heading beyond £400billion after a string of benefit giveaways.

Nothing she announced today will change that. She fiddled around with Motability rules but left the wider system untouched.

The chancellor sounded triumphant, but as Tory leader Kemi Badenoch pointed out, she is giving 560,000 households on benefits an extra £5,000 a year, while attacking households that are trying to save, invest, drive to work or build a pension.

So we’re facing another £26billion in tax on top of the £40billion hit in last year’s Budget. It’s straight back to 1970s tax-hiking Labour. And judging by the state of the economy, she’ll be back for more.

The Office for Budget Responsibility says Britain now faces five years of stagnating living standards as inflation and higher taxes bite. It expects real household disposable income to grow by just 0.25% a year.

The watchdog also cut the UK’s growth outlook for every year from 2026 and warned that borrowing this year will be £21billion higher than forecast. Cumulative borrowing will be nearly £70billion higher than previously expected.

Much of the rise is driven by Labour’s welfare U-turns and net zero policies, which will add around £11billion a year to the borrowing bill.

And how does the chancellor pay for it? By hiking income tax and pretending she isn’t. It’s a disaster for workers but good news for those on benefits. Yet it still won’t be enough, so we can expect more of the same soon enough.