Budget 2025: Starmer and Reeves ditch plans to raise income tax

Published

3 mins ago

November 14, 2025

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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.

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.

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.

Business

‘Staggering’ 20-year fall in domestic UK flights – as another form of transport benefits

Published

3 mins ago

November 14, 2025

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'Staggering' 20-year fall in domestic UK flights - as another form of transport benefits

The number of domestic UK flights has more than halved over the past 20 years, even as global air travel continues to grow.

This month, another UK regional airline, Eastern Airways, officially went into administration as our appetite for flying internally continues its steady descent.

A total of 213,025 UK flights were scheduled in 2025, compared to a peak in 2006 of 454,375 flights, research by aviation analytics firm Cirium, has found.

In other words, a fall of more than 240,000 flights, or an average daily reduction of 661 flights across the UK.

Perhaps surprisingly, cost isn’t a major factor in customers choosing to ditch flying for the car, coach or train, as fares have stayed roughly flat.

A pre-booked London to Edinburgh flight 20 years ago cost on average between £50 and £100 (once adjusted for inflation) compared with fares of around £40 – £70 today.

So what’s driving the trend?

A combination of better and more frequent train services, higher Air Passenger Duty tax, concern about the environmental impact of flying, and changing work patterns – especially since the pandemic – have all played a part.

Jeremy Bowen, Cirium CEO, said the results showed a “staggering change in the way we travel throughout the UK”.

“Airlines have responded by reducing their internal services and prioritising more popular destinations including Spain, France, and Italy,” he added.

Twenty years ago, Britain’s skies were busy with short domestic hops – British Airways (BA) and British Midland (bmi) shuttled passengers between London and the regions, and Flybe’s purple planes connected cities like Exeter, Leeds, Norwich, and Southampton.

Counting the cost

The impact of changing demand has been brutal.

Flybe, once Europe’s largest regional airline, has collapsed twice; bmi and its low-cost arm, bmibaby, is long gone; and several UK hubs have closed their commercial operations over the past 20 years, including Doncaster Sheffield in 2022, Blackpool in 2014 and Plymouth in 2011.

Also, airlines have shifted their priorities to making greater profits from short-haul services beyond the UK.

Aviation consultant Gavin Eccles said key low-cost carriers, such as easyJet and Ryanair, “have been ordering larger aircraft which means they can fly longer sectors”.

“They need to serve routes that are predominantly with strong ancillary options [baggage, seating] and domestic is more about commuting, so fewer chances to make extra revenues,” he explained.

Indeed, many surviving airports – like Southampton, Norwich, and Exeter – now rely mainly on seasonal leisure flights.

Domestic flights tend to be limited to feeder flights to long-distance hubs like Heathrow, Amsterdam, and Dublin, plus so-called lifeline-style services to remote regions, mostly in Scotland and Northern Ireland.

Rail firms are benefitting, with passenger journeys rising from about 1.08 billion in 2005/06 to 1.73 billion in 2024/25 – an increase of around 60%, according to the Office of Rail and Road Data.

Business

Octopus COPs £500m financing boost for electric vehicles arm

Published

9 hours ago

November 13, 2025

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Octopus COPs £500m financing boost for electric vehicles arm

The electric vehicle-leasing business which forms part of the same group as Britain’s biggest household energy supplier will on Friday announce a £500m extension to its financing war chest.

Sky News has learnt that Octopus Electric Vehicles (Octopus EV) has struck a deal with lenders including Lloyds Banking Group, Morgan Stanley, and Credit Agricole to take its total funding line to £2bn.

The additional financing paves the way for the expansion of the company’s UK fleet from 40,000 to 75,000 cars, and is an extension to a facility agreed with Lloyds in 2023.

Sources said a public announcement would be made at the COP30 climate summit in Brazil.

Last month, EVs accounted for 26% of all new cars in the UK, a record figure, while across Europe, more than 1.7 million EVs were registered in September – a 19% jump from the same month last year.

Octopus EV offers an all-in-one package comprising a leased car, bespoke EV tariffs, home chargers and access to Electroverse, which it describes as Europe’s largest public charging network.

“Electric momentum is surging across the UK and Europe,” said Gurjeet Grewal, CEO of Octopus EV.

“Every month, thousands more drivers are discovering just how affordable and enjoyable making the switch can be – and this fresh funding from Lloyds, Morgan Stanley and Crédit Agricole will allow us to bring even more zero-emission cars onto UK roads.”

Keir Mather, Minister for Aviation, Maritime and Decarbonisation, said the government had “helped over 30,000 people go electric thanks to our electric car grant since we launched it this summer, saving them cash with discounts of up to £3,750 on new EVs”.

“We’re backing people and industry to make the switch with £4.5bn investment, and it’s great to see industry players like Octopus backing the EV revolution and getting more electric cars out on our roads,” Mr Mather added.

The minister’s comments come, however, amid speculation about a pay-per-mile levy on electric car drivers in Rachel Reeves’s budget later this month.

Octopus’s EV arm also specialises in salary sacrifice schemes, which the chancellor is also reportedly planning to target by reducing or removing tax incentives.

Business

Professional services chiefs join chorus of opposition to Reeves tax threat

Published

10 hours ago

November 13, 2025

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Professional services chiefs join chorus of opposition to Reeves tax threat

An influential coalition of leaders from Britain’s professional services sector has warned Rachel Reeves that a Budget tax raid on the sector would “stunt growth” in the UK’s faltering economy.

Sky News has obtained a letter sent to the chancellor on Thursday, which was signed by leading figures including the president of The Law Society, the chief executive of the Institute of Chartered Accountants in England and Wales, and the bosses of other leading trade bodies including TheCityUK and the BVCA.

In it, they warn that reported plans to impose employers’ national insurance on limited liability partnerships (LLPs) would damage Britain.

“Such a move would strike at the heart of a sector that is not only growing but actively partnering with government to deliver economic growth,” they wrote.

“Our professional services sector sits among the UK’s global success stories – driving investment, creating jobs, and reinforcing the UK’s reputation as an attractive place to do business.

“Introducing higher taxes on LLPs now would be a misstep and will stunt growth.

“It would undermine the government’s stated ambition to support professional services as a growth partner and send a damaging signal to international investors.

“At a time when firms are already facing potential major regulatory changes – from anti-money laundering compliance to evolving tax adviser rules – this additional burden risks creating a perfect storm that stifles investment, hiring, and innovation.”

The letter warned that the mooted tax changes would force firms to reconsider their corporate structures, “triggering instability and uncertainty across our economy”.

“Meanwhile, our global competitors – many of whom are actively courting professional services firms – would seize the opportunity to attract talent and capital away from the UK,” it added.

The letter was also signed by the City of London Law Society and The City of London Corporation.

It has been sent to the chancellor less than two weeks before she delivers her Budget, and adds to the multitude of warnings from across the economy about the levers she intends to pull to plug an estimated £30bn fiscal black hole.

Last week, the Financial Times reported that a potential tax raid on LLPs was likely to be less severe than feared following warnings from senior sector figures.

The Treasury has declined to comment on the prospective move.