Ms Reeves has outlined plans to ease the burden of Rishi Sunak's secret tax raid. Photograph: Stefan Rousseau/PA Wire
Rachel Reeves has hinted at tax cuts for the richest people as the shadow chancellor tries to transform Labor into the party of economic growth.
Ms Reeves has vowed to ensure «success» celebrated» under the Labor government, outlining its ambitions. to ease the burden of Rishi Sunak's years-long secret tax raid on workers.
Speaking to The Telegraph at the World Economic Forum in Davos, Switzerland, she said cutting taxes on «working people» remained a priority, including for those paying the highest rate of 45 pence.
Ms Reeves said the freeze on income tax thresholds amid rising inflation «affected people paying top and basic rate tax, both of which are groups of people who work hard but are paid less every month.»
She added: “My instinct is to cut taxes.”
The six-year freeze proposed by the Prime Minister would see more than seven million people move into a higher income tax band by the end of the decade as benefits have not kept pace with rising prices.
Ms Reeves stressed that it would be «irresponsible» to commit to a tax cut without specifying how it would be financed, as she has vowed to stick to the debt reduction plan.
However, she was asked if she agreed with what she wanted cut taxes on workers “around the world.” spectrum”, including those earning more than £100,000, the shadow chancellor replied: “Yes.”
Her comments are the strongest signal that Labor wants to attract people on higher incomes ahead of an expected general election this autumn.
However, they drew condemnation from union leaders who accused Labor of pandering to the super-rich. < /p>
Sharon Graham, Unite general secretary, said: “It is becoming increasingly clear that government intervention and investment are required if we are to achieve net zero, ensure our energy security, and maintain and grow industries vital to the national interest such as steel industry. This is something that the governments of the European Union and the United States understand and act on.
“It is concerning that Rachel Reeves appeared to move further away from this position at the Davos event, which already epitomizes the problem huge wealth is not distributed fairly and is not used for investment in the real economy.
“If she doesn't do the right thing, workers and the country's future success will pay the price. Labor needs to be bolder if it is to deliver economic growth that delivers a bright future for everyone, not just those at the top.”
Top rate taxpayers now pay a rate of 45p on all income over £125,140 after Mr Hunt lowered the threshold last year from £150,000.
Removing this would cost according to Institute for Fiscal Studies (IFS), the Treasury will cost around £1 billion a year in 2025-26 and put more than £1,000 back into the pocket of the typical extra tax payer.
Increasing the 40p threshold from £50,270 to £60,000 would cost at least £9 billion a year, according to the IFS. Treasury assumptions show that increasing the base rate by 10 percent to around £13,700 would cost around £10 billion a year.
Labor sources stressed that people paying the 20p and 40p rates would be prioritized if the thresholds were increased, and that this would only be possible if the economy grows and debt falls. A source said: «High rate taxpayers are also benefiting from the base rate cut.»
Ms Reeves said her iron-clad budget rules aimed at cutting debt remained a priority. She said: «We will support affordable plans to cut taxes on working people because it is important that everything complies with fiscal rules.»
«I am not going to take on unfunded liabilities because that would be irresponsible. but I instinctively want to reduce taxes.”
Official forecasts show that a long-term freeze on income tax thresholds will generate £44.6 billion in additional tax revenue for the Treasury by 2028-29.
The Office for Budget Responsibility (OBR) predicted last November that an extra three million workers would be forced to pay the 40p income tax rate over the next five years as thresholds remain frozen amid still-high inflation which has led to growth of nominal wages. .
Official data showed prices rose 4% in the year to December, compared with 3.9% in November, amid expectations of falling inflation. The FTSE 100 suffered its biggest sell-off in five months as traders bet on a delay in interest rate cuts.
A further 400,000 workers will be forced to pay the top rate of tax of 45%, according to OBR calculations.
This so-called fiscal drag also means that another four million workers on relatively low incomes will be affected for the first time tax system.
The IFS estimates that the total number of income tax payers will increase to almost 40 million by the end of the decade, with almost 10 million of them paying higher and maximum rates.
A Treasury spokesman said: “Average earners will pay £1,000 less in tax this year than they would otherwise pay due to our National Insurance cuts and rising inflation above tax thresholds since 2010.
“Our autumn announcement will provide the biggest boost to potential record growth without stoking inflation. We cut taxes for hardworking people and our tax burden remains lower than any major European economy, saving the average employee £450 a year.»
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