Reeves plots Budget council tax raid in bid to fill black hole in Britain's finances
The Chancellor is mulling an overhaul of the council tax system to keep to her much-maligned fiscal rules
Rachel Reeves is planning a major Budget tax raid on the owners of the most expensive homes by creating new higher bands of council tax.
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After discussion of a possible levy on mansions, sources close to the Chancellor told the Financial Times that the idea of reforming bands is the "least worst option" to raise revenues from wealthy homeowners.
A source told the FT: "It is vital for the political balance of the Budget to show everyone is paying their fair share".
The idea of council tax reform has repeatedly been suggest in the past decade - with current calculations based on house price valuations from 1991.
Conservative Chancellor George Osborne was reportedly in favour of higher bands back in 2012 - with extra mechanisms to make sure that the money flowed to the Treasury rather than local authorities.
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The suggestion comes after reports that Ms Reeves is also considering a 2 per cent income tax hike and matching cut in national insurance (NI) in November's Budget.
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.
The suggestion is seen by some as away to tax wealth and those better off without targeting those on low wages.
Sir Keir Starmer repeatedly declined to reaffirm his commitment to Labour's manifesto pledge not to hike national nnsurance, income tax or VAT at Prime Minister's Questions on Wednesday.
He was repeatedly pressed on the matter by Conservatives leader Kemi Badenoch in the House of Commons.
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 demanded 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 also addressed 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.