Keir Starmer and Rachel Reeves will face a cabinet backlash if the chancellor goes ahead with rumoured plans to break the Labour manifesto pledge and raise income tax at the Budget.
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, while The Independent reported last month 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 avoid raising 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.”
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 having promised in the election to scrap them.
Sir Keir’s government has stuck doggedly to the tax promise for months, but 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 facing a black hole of between £30bn and £40bn in her spending plans, she has already been urged by economists 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 £2 million 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 Number 11 do not think they can get them past Labour backbenchers after the welfare rebellion before the summer.
But leading pollsters have warned that the government could be facing a point of no return with voters by breaking the manifesto commitment.
Sir John 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.”
However, he warned in terms of a recovery in the polls that “there is a risk to their credibility.”
Renowned pollster Lord Robert Hayward agreed that the move would not have a major impact in the short term, but he pointed to Techne polling which revealed less than one in five voters (19 per cent) now have trust in Starmer’s government.
He 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 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.”
