Sticking to Labour’s manifesto pledge and freezing income tax thresholds rather than raising income tax has hurt low- and middle-income earners, an influential thinktank has said.

Millions of these workers “would have been better off with their tax rates rising than their thresholds being frozen”, according to the Resolution Foundation’s chief executive, Ruth Curtice.

“Ironically, sticking to her manifesto tax pledge has cost millions of low-to-middle earners”, she said.

Chancellor Rachel Reeves announced in her budget speech that the point at which people start paying higher rates of tax has been held. It means earners are set to be dragged into higher tax bands as they get pay rises.

The chancellor felt unable to raise income tax as the Labour Party pledged not to raise taxes on working people in its election manifesto.

But many are saying that pledge was broken regardless, as the tax burden has increased by £26bn in this budget.

When asked by Sky News whether Ms Reeves would accept she broke the manifesto pledge, she said on Thursday: “I do recognise that yesterday I have asked working people to contribute a bit more by freezing those thresholds for a further three years from 2028.”

“I do recognise that that will mean that working people pay a bit more, but I’ve kept that contribution to an absolute minimum”.

Read more:
Budget 2025: The key points at a glance
Budget tax calculator: How much more will you pay?

As a result of the freeze in income tax bands, another closely watched thinktank, the Institute for Fiscal Studies (IFS), said a basic-rate taxpayer will pay £220 more tax per year, while a higher-rate taxpayer will be charged £600 more annually.

Welcome news

The Resolution Foundation thinktank, which aims to raise living standards, welcomed measures designed to support people with the cost of living, such as the removal of the two-child benefit cap, which limited the number of children families could claim benefits for.

The announced reduction in energy bills through the removal of as yet unspecified levies was similarly welcomed.

The chancellor said bills would become £150 cheaper a year, but the foundation said typical energy bills will fall by around £130 annually for the next three years, “though support then fades away”.

Credit was also given to Ms Reeves for increasing the financial cushion she has against market shocks, like a spike in energy prices.

This is part of her self-imposed fiscal rules to bring down debt and balance the budget by 2030.

As a result, less policy speculation and more stability can be expected.

“The decision to increase her headroom, when she didn’t strictly need to, deserves credit,” said economics research institute, the IFS.

“It means that it will require a larger shock to blow the chancellor off course. This in turn should mean that we can expect a period of greater stability and more muted policy speculation.”

More money, however, will be borrowed as a result of the budget, said independent forecasters, the Office for Budget Responsibility (OBR).

Budget spending and tax policies increase borrowing by an average of £5bn over the next three years, but then reduces it by roughly £13bn in the following two.

More to come

This budget won’t be the last of it, the Resolution Foundation’s Ms Curtice said, as economic growth forecasts have been downgraded by the OBR, and growth is a “hurdle that remains to be cleared”.

“Until that challenge is taken on, we can expect plenty more bracing budgets,” she added.

It comes despite Ms Reeves saying as far back as last year, there would be no more tax increases.

Ultimately, though, the foundation said: “The great drumbeat of doom that preceded the chancellor’s big day turned out to be over the top: the forecasts came in better than many had feared.”

The Scottish government does not intend to increase income tax rates or introduce new bands in next year’s budget, First Minister John Swinney has vowed.

However, the SNP leader did not disclose if the pay thresholds will remain the same.

In the 2025 Budget, Chancellor Rachel Reeves announced £26bn worth of tax rises – including extending the freeze on tax thresholds which could see earners dragged into higher bands if they get a pay rise.

At First Minister’s Questions on Thursday, Scottish Tory leader Russell Findlay accused the UK chancellor of “screwing taxpayers”.

He added: “She’s also borrowing even more money, leaving more debt to future generations. And she did all of this, all of this, despite saying that she would do none of it.

“Does John Swinney intend to keep the SNP manifesto promise not to raise tax on Scottish workers?”

In Scotland, Holyrood ministers have used devolved powers to set up an income tax system with seven bands compared to the UK’s four.

Earlier in the day, Finance Secretary Shona Robison said the tax strategy in January’s budget would remain the same ahead of next year’s Holyrood election.

Citing this, Mr Swinney said: “Obviously, the government is giving consideration to the implications of the United Kingdom budget for the Scottish budget.

“But the finance secretary confirmed this morning that the Scottish government will not increase income tax rates or introduce any new bands.”

Read more:
Budget 2025: The key points at a glance
Budget calculator: See how your finances have changed

The UK government’s scrapping of the two-child benefit cap has freed up about £155m in Scottish government funding that was going to be used to mitigate the cap north of the border.

Mr Findlay, MSP for West Scotland, urged Mr Swinney to now use that cash to lower income tax bills.

He said: “We believe that Scottish taxpayers deserve to keep more of their own hard-earned money. They deserve fairness and they deserve a break from higher bills.”

The first minister previously said the money would be invested in other initiatives to help reduce child poverty “even further”.

Mr Swinney said he was “glad” the Scottish government “shamed the Labour Party into acting on this particular issue”.

He added: “So, when Mr Findlay attacks me for asking people on higher earnings to pay more in tax, I’m prepared to do that so that I can work to eradicate child poverty, which is the best thing for the future of our country.”

Representatives of European Union member states reached an agreement on Wednesday in the Council of the EU to move forward with the controversial “Chat Control” child sexual abuse regulation, which paves the way for new rules targeting abusive child sexual abuse material (CSAM) on messaging apps and other online services.

“Every year, millions of files are shared that depict the sexual abuse of children… This is completely unacceptable. Therefore, I’m glad that the member states have finally agreed on a way forward that includes a number of obligations for providers of communication services,” commented Danish Minister for Justice, Peter Hummelgaard.

The deal, which follows years of division and deadlock among member states and privacy groups, allows the legislative file to move into final talks with the European Parliament on when and how platforms can be required to scan user content for suspected child sexual abuse and grooming.

The existing CSAM framework is set to expire on April 3, 2026, and is on track to be replaced by the new legislation, pending detailed negotiations with European Parliament lawmakers.

EU Chat Control laws: What’s in and what’s out

In its latest draft, the Council maintains the core CSAM framework but modifies how platforms are encouraged to act. Online services would still have to assess how their products can be abused and adopt mitigation measures.

Service providers would also have to cooperate with a newly-established EU Centre on Child Sexual Abuse to support the implementation of the regulation, and face oversight from national authorities if they fall short.

While the latest Council text removes the explicit obligation of mandatory scanning of all private messages, the legal basis for “voluntary” CSAM detection is extended indefinitely. There are also calls for tougher risk obligations for platforms.

Related: After Samourai, DOJ’s money-transmitter theory now looms over crypto mixers

A compromise that satisfies neither side

To end the Chat Control stalemate, a team of Danish negotiators in the Council worked to remove the most contentious element: the blanket mandatory scanning requirement. Under previous provisions, end-to-end encrypted services like Signal and WhatsApp would have been required to systematically search users’ messages for illegal material.

Yet, it’s a compromise that leaves both sides feeling shortchanged. Law enforcement officials warn that abusive content will still lurk in the corners of fully encrypted services, while digital rights groups argue that the deal still paves the way for broader monitoring of private communications and potential for mass surveillance, according to a Thusday Politico report.

Lead negotiator and Chair of the Committee on Civil Liberties, Justice and Home Affairs in the European Parliament, Javier Zarzalejos, urged both the Council and Parliament to enter negotiations at once. He stressed the importance of establishing a legislative framework to prevent and combat child sexual abuse online, while respecting encryption.

“I am committed to work with all political groups, the Commission, and member states in the Council in the coming months in order to agree on a legally sound and balanced legislative text that contributes to effectively prevent and combating child sexual abuse online,” he stated.

The Council celebrated the latest efforts to protect children from sexual abuse online; however, former Dutch Member of Parliament Rob Roos lambasted the Council for acting similarly to the “East German era, stripping 450 million EU citizens of their right to privacy.” He warned that Brussels was acting “behind closed doors,” and that “Europe risks sliding into digital authoritarianism.”

Telegram founder and CEO Pavel Durov pointed out that EU officials were exempt from having their messages monitored. He commented in a post on X, “The EU weaponizes people’s strong emotions about child protection to push mass surveillance and censorship. Their surveillance law proposals conveniently exempted EU officials from having their own messages scanned.”

Related: Advocacy groups urge Trump to intervene in the Roman Storm retrial

Privacy on trial in broader global crackdown

The latest movement on Chat Control lands in the middle of a broader global crackdown on privacy tools. European regulators and law‑enforcement agencies have pushed high‑profile cases against crypto privacy projects like Tornado Cash, while US authorities have targeted developers linked to Samurai Wallet over alleged money‑laundering and sanctions violations, thrusting privacy‑preserving software into the crosshairs.

In response, Ethereum co‑founder Vitalik Buterin doubled down on the right to privacy as a core value. He donated 128 ETH each (roughly $760,000) to decentralized messaging projects Session and SimpleX Chat, arguing their importance in “preserving our digital privacy.”

Session president Alexander Linton told Cointelegraph that regulatory and technical developments are “threatening the future of private messaging,” while co-founder Chris McCabe said the challenge was now about raising global awareness.

Magazine: 2026 is the year of pragmatic privacy in crypto — Canton, Zcash and more