Sir Keir Starmer and Rachel Reeves will face a cabinet backlash if the chancellor breaks Labour’s manifesto pledge and raises income tax in the Budget later this month.
Earlier this week, it was reported that the Treasury is looking into the possibility of putting up the rate by 2p, while simultaneously cutting national insurance by 2p. Just last month, this newspaper reported that Ms Reeves is considering changes to the top 45p rate.
The Independent has learnt that a number of senior ministers are concerned that breaking the manifesto pledge to not raise income tax, VAT or employee national insurance contributions could prevent any hope of a political recovery, with the party languishing in the polls.
“What those who say we should not stick to that pledge fail to realise is just how important it was in winning the election,” a senior minister said.
“Elections are hard to win. They are particularly hard for Labour to win. We don’t win many of them. So breaking that pledge comes with significant risk about us losing the trust of voters.”
Another minister suggested: “We are going to struggle to recover in the polls if people do not believe what we are saying.”
Among those understood to have raised concerns over tax hikes have been chancellor of the Duchy of Lancaster Darren Jones, new welfare secretary Pat McFadden, home secretary Shabana Mahmood and communities secretary Steve Reed.
The analysis is shared by leading pollsters, including Professor Sir John Curtice, who have likened it to the “tuition fee moment” which was hugely damaging to the Lib Dems in 2010 when they trebled them despite promising to scrap them.
Sir Keir’s government has stuck doggedly to the tax promise for months, but when asked directly by Tory leader Kemi Badenoch on Wednesday whether he would honour the pledge, the prime minister declined to say.
However, with options running out for the chancellor, who is facing a black hole of between £30bn and £40bn in her spending plans, economists are urging her to bite the bullet and raise income tax instead of trying a “hotchpotch” of smaller taxes.
But a number of cabinet ministers would rather see the chancellor “look at welfare again” and find savings in an overall budget of £1.3 trillion across departments.
There are already concerns from senior ministers about the prospect of a mansion tax on properties worth £2m or more, while some are critical of “anti-ambition” taxes such as VAT on private school fees.
It is understood though that significant cuts have been ruled out because Downing Street and No 11 do not think they can get them past Labour backbenchers after the welfare rebellion earlier this year.
But leading pollsters have warned that the government could be facing a point of no return with voters by breaking the manifesto commitment.
Prof Curtice said: “I think clearly there is a risk out there that, like tuition fees for the Liberal Democrats in 2010 – it was regarded as a crucial part of their selling proposition.”
He also noted: “Labour is hoping to cast the blame on the Tories and Brexit. Now the difficulty, of course, is, well, you could have said this 16 months ago.”
Renowned pollster Robert Hayward agreed that the move would not have a major impact in the short term, but he pointed to Techne polling, which revealed that less than one in five voters (19 per cent) now have trust in Sir Keir’s government.
Lord Hayward said: “I think that this will end up being high up on the list of ‘and another thing’ issues from voters at the next election when it comes to reasons not to vote Labour.”
He suggested that if Ms Reeves goes for the hike, the level will make little difference. “The impact will be the same for 1p that it is for 2p,” he added.
Former YouGov president Peter Kellner said: “The chancellor missed her two opportunities to minimise the electoral damage of breaking her tax pledges: immediately after the election, using the Tory black hole argument, or this spring, when [Donald] Trump upended world trade rules and raised tariffs.
“It is much harder now. She might get away with it if she can sell the whole package as economically smart and socially progressive. At best a 50-50 chance of pulling it off.”
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