Reeves plans stealth taxes as Starmer prepares to splurge billions on NHS

Sir Keir Starmer has insisted that his government will not break Labour’s manifesto pledge over raising taxes on working people despite growing concerns about plans for stealth taxes to help fund the NHS.

The prime minister is set to reveal new plans for the NHS which will include billions in extra investment accompanied by wholesale reform.

The revelation comes as The Independent has been told that a plan is being put together by the UK’s most powerful think tank Labour Together on how Labour will win the next election. The think tank’s former director Morgan McSweeney is now Sir Keir’s chief of staff and a source has said that “the NHS and cost of living” will be the two pillars for a Labour victory in 2029.

But the demands to provide extra funding for the NHS is adding more pressure on chancellor Rachel Reeves, who has already told her colleagues she needs to find £40bn of savings and tax rises just to stand still.

Starmer and Reeves are under huge pressure regarding the make-up of the 30 October Budget (Reuters)
Starmer and Reeves are under huge pressure regarding the make-up of the 30 October Budget (Reuters)

However, the prime minister told journalists Labour will “keep our manifesto pledges” amid reports Ms Reeves could extend the freeze on income tax thresholds in this month’s Budget beyond 2028.

But there are warnings that freezing the thresholds along with plans to bring in more wealth taxes will accelerate the brain drain and flight of millionaires from the UK.

The plan to freeze thresholds will raise extra cash through the so-called “fiscal drag”, where thresholds for the 40p and 45p tax rates are not raised in line with inflation, meaning over time more workers creep into these higher tax brackets.

Treasury sources have insisted that extending the income thresholds beyond plans for up to 2028 does not breach the manifesto pledge on not raising income tax, national insurance of VAT.

However, already there are concerns that Ms Reeves will raise national insurance on employers’ contributions which the Institute for Fiscal Studies (IFS) has warned will be a breach of the manifesto promise. Former Bank of England governor Mervyn King advised Ms Reeves that she should raise national insurance instead of “fiddling” the rules to borrow more.

Other tax hikes look set to include capital gains tax, apart from on second homes, and another raid via a “death tax”, where the threshold for paying inheritance tax will be reduced.

Former Tory leader Sir Iain Duncan Smith warned: “We’re not talking about ‘zillionaires’. With house prices in southern England, you won’t even get a flat for that money. A two-bed flat in London would be twice that price.”

But there are wider concerns about the wealthy moving out of the UK to places with lower taxes.

According to UBS’s Global Wealth Report some 500,000 millionaires – or 17 per cent – will quit the UK by 2028.

Wes Streeting is set to announce major reforms to the NHS (PA Wire)
Wes Streeting is set to announce major reforms to the NHS (PA Wire)

Such a move will leave question marks over London’s status as the capital for the global elite.

The UK was already second only behind India for millionaires fleeing the country.

Former chancellor Nadhim Zahawi, who is a patron of the Adam Smith Institute, said: “The rate at which millionaires are leaving the UK is a vote of no confidence in both our current tax and regulatory regime, and anti-business and anti-prosperity measures that could be coming down the line.

“I urge the government to rule out anything in the autumn Budget on 30 October that could drive them away even more.”

A recent freedom of information request revealed that around 500,000 people will be caught in the 60 per cent tax trap of those earning between £100,000 and £125,140 a year which sees people lose the personal allowance and eventually pay 45p on all earnings.