Sir Keir Starmer and Rachel Reeves have scrapped plans to break their manifesto pledge and raise income tax rates in a massive U-turn less than two weeks from the budget.

The decision, first reported in the Financial Times, comes after a bruising few days which has brought about a change of heart in Downing Street.

Read more: How No 10 plunged itself into crisis

I understand Downing Street has backed down amid fears about the backlash from disgruntled MPs and voters.

The Treasury and Number 10 declined to comment.

The decision is a massive about-turn. In a news conference last week, the chancellor appeared to pave the way for manifesto-breaking tax rises in the budget on 26 November.

She spoke of difficult choices and insisted she could neither increase borrowing nor cut spending in order to stabilise the economy, telling the public “everyone has to play their part”.

The decision to backtrack was communicated to the Office for Budget Responsibility on Wednesday in a submission of “major measures”, according to the Financial Times.

The chancellor will now have to fill an estimated £30bn black hole with a series of narrower tax-raising measures and is also expected to freeze income tax thresholds for another two years beyond 2028, which should raise about £8bn.

Tory shadow business secretary Andrew Griffith said: “We’ve had the longest ever run-up to a budget, damaging the economy with uncertainty, and yet – with just days to go – it is clear there is chaos in No 10 and No 11.”

How did we get here?

For weeks, the government has been working up options to break the manifesto pledge not to raise income tax, national insurance or VAT on working people.

I was told only this week the option being worked up was to do a combination of tax rises and action on the two-child benefit cap in order for the prime minister to be able to argue that in breaking his manifesto pledges, he is trying his hardest to protect the poorest in society and those “working people” he has spoken of so endlessly.

But days ago, officials and ministers were working on a proposal to lift the basic rate of income tax – perhaps by 2p – and then simultaneously cut national insurance contributions for those on the basic rate of income tax (those who earn up to £50,000 a year).

That way the chancellor can raise several billion in tax from those with the “broadest shoulders” – higher-rate taxpayers and pensioners or landlords, while also trying to protect “working people” earning salaries under £50,000 a year.

The chancellor was also going to take action on the two-child benefit cap in response to growing demand from the party to take action on child poverty. It is unclear whether those plans will now be shelved given the U-turn on income tax.

A rough week for the PM

The change of plan comes after the prime minister found himself engulfed in a leadership crisis after his allies warned rivals that he would fight any attempted post-budget coup.

It triggered a briefing war between Wes Streeting and anonymous Starmer allies attacking the health secretary as the chief traitor.

Read more: Is Starmer ‘in office but not in power’?

The prime minister has since apologised to Mr Streeting, who I am told does not want to press for sackings in No 10 in the wake of the briefings against him.

But the saga has further damaged Sir Keir and increased concerns among MPs about his suitability to lead Labour into the next general election.

Insiders clearly concluded that the ill mood in the party, coupled with the recent hits to the PM’s political capital, makes manifesto-breaking tax rises simply too risky right now.

But it also adds to a sense of chaos, given the chancellor publicly pitch-rolled tax rises in last week’s news conference.

The home secretary is set to unveil sweeping reforms to tackle illegal immigration, as she considers potential changes to human rights law.

Shabana Mahmood will announce on Monday a series of measures to make it easier to remove and deport illegal migrants, and reduce the “pull factors” that make the UK attractive to asylum seekers.

The Home Office said they would be the “most sweeping reforms to tackle illegal migration in modern times”.

She is said to believe that “excessive generosity and ease of remaining” in the UK, along with systemic barriers, has made deportations extremely difficult, The Times reported.

It is understood that many of the changes set to be proposed by the home secretary will be modelled on the Danish system, under which 95% of failed asylum seekers are deported.

Denmark has tighter rules on family reunions, and restricts some refugees to a temporary stay.

Read more: Could Danish model save Labour’s bacon?

Ms Mahmood is also mulling reforms to the European Convention on Human Rights and human rights law to “end the abuse of the system that leads to unjustified claims to delay or stop deportations”, a Home Office source said.

The overhaul of modern slavery laws will require migrants to make a claim that they have been a victim as soon as they arrive in the UK, rather than allowing them to raise it unexpectedly later on, which has resulted in delayed deportations, The Telegraph reported.

The number of offences qualifying foreign criminals for automatic removal is also set to be increased, the paper said.

And judges are expected to be required to prioritise public safety over claims from migrants that deporting them would breach their family rights or put them at risk of “inhuman” treatment if they were returned to their home country.

Deportations are up – but so are boat crossings

Ahead of next week’s announcements, the Home Office released new figures showing 48,560 people have been removed from the UK since Labour came to power.

The figure, which includes failed asylum seekers, foreign criminals and others with no right to be in the UK, is a 23% increase compared to the 16 months before last year’s election.

Read more politics news:
Under-fire Starmer aide won’t quit
Plans to raise income tax in budget ditched

Ms Mahmood said: “We’ve ramped up enforcement, deported foreign criminals from our streets, and saved taxpayers millions.

However, small boat crossings continue to rise – 39,075 people have made the journey so far this year, according to Home Office figures.

That is an increase of 19% on the same point in 2024 and up 43% on 2023, but remains 5% lower than the equivalent point in 2022, which remains the peak year for crossings.

The prime minister’s chief of staff Morgan McSweeney will not leave his job at Number 10, Sky News understands, despite furious calls for him to be dismissed.

Sir Keir Starmer’s closest confidante has been under fire in recent days following a briefing row that saw allies of the PM say Sir Keir Starmer would fight any attempts to remove him from office.

Health Secretary Wes Streeting was also accused of plotting to replace Sir Keir Starmer after the chancellor’s autumn budget.

Mr Streeting has strongly denied the claim, and accused Number 10 of having a “toxic” culture and of attempting to “kneecap” him.

Sir Keir also disavowed the briefings, saying he “never authorised” the attack on his health secretary, and said cabinet ministers should not be briefed against.

This morning, several national newspapers led with calls from Labour MPs and unnamed ministers for Mr McSweeney to resign or be sacked – the chief of staff himself becoming a victim of anonymous briefings.

But Sky News understands that he categorically denies he was “directly or indirectly” behind the briefings and will be remaining in his job.

Mr McSweeney has been in post as chief of staff since October 2024, and is credited as being a key architect of Labour’s transformation following the 2019 election defeat and subsequent victory in 2024.

Mr Streeting was not among those who had called for Mr McSweeney to go, saying on Wednesday that “there wouldn’t be a Labour government” without him.

But he had a furious reaction to the briefings against him, telling Mornings With Ridge And Frost: “I do think that going out and calling your Labour MPs ‘feral’ is not very helpful.”

He added: “I do think that trying to kneecap one of your own team when they are out, not just making the case for the government, but actually delivering the change that we promised, I think that is also self-defeating and self-destructive behaviour.”

Sir Keir said at Prime Minister’s Questions on Wednesday: “Let me be clear. I’ve never authorised attacks on cabinet members. I appointed them to that post because they’re the best people to carry out that job.”

He also said: “Morgan McSweeney, my team and I are absolutely focused on delivering for the country.”

The prime minister and his health secretary spoke “very briefly” later that evening, in which he apologised.

On Thursday, Sir Keir said that he had been “assured that no briefing against ministers was done from No 10”, and it appears that no formal investigation into who spoke to journalists on Tuesday is under way.

Tory leader Kemi Badenoch accused Sir Keir of having “lost control of Number 10” and said two weeks from the 26 November budget, “the government has descended into civil war”.