Reeves mulls 2% income tax hike as Tories urge Starmer to sack Chancellor if she breaks manifesto pledge

Ms Reeves is considering simultaneously hiking the basic rate of income tax by 2 per cent alongside an equivalent cut in national insurance (NI), according to Telegraph.

The move, which will not hit employees but will target pensioners and landlords, would raise around £6bn as the Chancellor seeks to fill a black hole in Britain's public finances.

If announced, Ms Reeves would become the first Chancellor since the 1970s to increase the basic rate, which is currently 20 per cent.

The reports come after Prime Minister Sir Keir Starmer repeatedly declined to reaffirm his commitment to Labour's manifesto pledge not to hike National Insurance, income tax or VAT at Prime Minister's Questions.

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He was repeatedly pressed on the matter by Conservatives leader Kemi Badenoch in the House of Commons on Wednesday.

But the PM batted away Badenoch’s questions, responding: "The Budget is on November 26 and we will lay out our plans."

Sir Keir also appeared to dodge queries on whether Labour would extend a freeze on income tax personal allowances, which has been branded a 'stealth tax'.

After the indications that Reeves was considering a hike in personal income tax, Mrs Badenoch is set to go further and suggest that Starmer should sack Reeves if she goes ahead with tax rises.

At a pre-Budget rally on Thursday marking a year since Ms Reeves’ first fiscal event, the Tory leader will demand that the Chancellor “get the axe if she puts up tax”.

Before the rally, Mrs Badenoch said: “Nobody voted for high taxes and out-of-control spending, but that’s what they’re getting from this weak Prime Minister.

"After her Budget last year, Rachel Reeves promised she was ‘not coming back with… more taxes’. But now that looks like a lie as she is gearing up to impose more punishing tax hikes.”

Shadow chancellor Sir Mel Stride, who is also expected to address the rally, said: “My message to Sir Keir is simple: if Rachel Reeves breaks her promise again, she must go.”

Ms Reeves faces another challenging Budget on November 26 as she finds her spending plans squeezed by weak economic growth, persistent inflation and an expected downgrade to the Office for Budget Responsibility’s productivity forecasts.

The Institute for Fiscal Studies has warned she would need to find at least £22 billion of tax rises or spending cuts to restore the £10 billion “headroom” she previously left herself against her borrowing target.

But the figure could be even higher if the OBR’s downgrade is larger than expected, and if she needs to pay for the expected abolition of the two-child benefit cap.