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Labour is considering breaking its manifesto pledge and raising income tax to help plug a £30 billion hole in the public finances, according to new reports. As reported by The Guardian , the party is considering a 1p rise to the basic rate at next month's Budget, which would raise around £8 billion. Raising income tax may be the only way for Chancellor Rachel Reeves to get close to plugging the gap, advisers in the Treasury and No 10 believe. Read more: Rarest 50p coins worth over £200 as people urged to 'check change' Laura Purkess, personal finance expert at Investing Insiders , said: "The fact Labour is seriously considering an income tax rise shows how dire the numbers must really be. "It's a political nightmare for the party and would be a constant point-scorer for the opposition and Reform, which will relish in them U-turning on another manifesto pledge. "Labour are probably kicking themselves for ever promising not to raise income tax, given a 1p rise would reportedly raise around £8bn immediately. That's nothing to sniff at when the finances are in such a poor state." She added that "it would be less damaging politically," though it "would raise a lot less money." Purkess continued: "For regular people, a tax rise on their earnings wouldn't just be a political disappointment - it will just put further pressure on household finances that are already seriously squeezed from all angles. "Many families don't have anything extra to spare, and will have to make more cuts to their living standards to accommodate this. "That can cause people to neglect other important financial decisions, such as creating or updating a will, setting up a retirement plan, or putting protection policies in place for ill health or loss of their income. "Taking more money from people's purses right now will also reduce spending and damage their confidence to invest - something Labour has been increasingly pushing for - which would have a knock on the wider economy. “Unfortunately, it looks like Labour is in a real pickle, so if they do decide to stick to their manifesto pledge, we can probably expect a number of other levers being pulled to make up for it.” Join our dedicated BirminghamLive WhatsApp community for the latest updates sent straight to your phone as they happen. You can also sign up to our Money Saving Newsletter which is sent out daily via email with all the updates you need to know on the cost of living, including DWP and HMRC changes, benefits, payments, banks, bills and shopping discounts. Get the top stories in your inbox to browse through at a time that suits you.
