**Income Tax Rates Stay Steady: Reeves Holds Back After Positive Economic News**

Rachel Reeves, the Chancellor, is reportedly reversing her stance on income tax rates amid better-than-expected economic forecasts. Initially, there were strong indications that income tax rates would rise, defying Labour’s manifesto promise not to increase the basic, higher, or additional rates of income tax. However, updated estimates from the Office for Budget Responsibility (OBR) suggested a gap in public finances was £10 billion smaller than previously assessed, prompting her decision not to raise these rates.

Instead of increasing rates, Reeves may consider freezing or lowering income tax thresholds—the levels at which different tax rates apply. This alternative could lead to more people paying income tax as their salaries naturally rise due to inflation, despite formal tax rates remaining unchanged. If she opts to extend the previous freeze introduced in April 2023, it could generate up to £8.3 billion annually but might contradict her earlier position against such measures, suggesting it would hurt working individuals.

In addition to tax thresholds, there are discussions of raising other taxes, including potentially implementing new taxes on electric vehicles and higher taxes on the gambling sector, as she navigates a complex fiscal landscape. Reeves faces the challenge of filling a £20 billion hole in the public finances, upholding her self-imposed debt and borrowing rules, while also managing the mixed sentiments within her party regarding public promises.<br>

Despite the move to maintain current tax rates, internal party discussions reflect tensions, as many Labour MPs are wary about reneging on election commitments. Key figures like Health Secretary Wes Streeting and Deputy Leader Lucy Powell emphasize the importance of keeping these commitments as they prepare for upcoming elections in Scotland, Wales, and England.

The article highlights the ongoing pressure on the Chancellor to deliver a budget that aligns with political promises while effectively managing the economy. In the face of rising government borrowing costs and uncertainties around global economic conditions, Reeves’ approach underlines a careful balance of fiscal discipline and political accountability.