REEVES DROPS TAX RISE PLAN – Chancellor scraps income tax hike as markets slide
Finance Minister Rachel Reeves has dropped plans to raise income tax rates in this month’s budget. The move is aimed at avoiding a political backlash—but it’s already rattling financial markets.
Sterling slipped 0.3%, hitting its lowest level against the euro in more than two and a half years. Investors reacted swiftly, fearing Reeves may struggle to deliver the tough measures needed to stabilise Britain’s public finances.
Government bond markets also took a hit. Long-dated gilt yields jumped by around 12 basis points, putting them on track for their worst day since early July—when a tense parliamentary appearance by Reeves previously shook investor confidence.
Reeves still needs to find tens of billions of pounds to stay within her fiscal targets, including balancing the budget by 2029–2030. Her recent comments—“we will all have to contribute”—had led many to believe an income tax rise was coming.
The Treasury declined to comment on the report. Investors, meanwhile, are watching closely for any sign that Reeves may retreat from the tough fiscal path that had previously helped drive bond yields lower.
