Former Bank of England Chief Warns Income Tax Hike is Inevitable, Criticizes Reeves’ Promise

[Social Media]

 

Mervyn King, the former governor of the Bank of England, has criticized Chancellor Rachel Reeves’ pre-election tax promises as “irresponsible” and warned that an increase in income tax will be necessary. King, who led the Bank from 2003 to 2013 and was once Reeves’ boss during her time there, argued that she made “silly” commitments on taxation before the general election and should reconsider them now that she is in government.  

 

During the campaign, Labour pledged not to increase VAT or income tax and refused to reverse a Conservative government decision to cut employee national insurance contributions. Economists at the time warned that this cut was unsustainable. However, in her first Budget, Reeves opted to raise employer national insurance contributions, aiming to generate around £25 billion annually.  

 

“I think it would have been better to have said in the Budget, ‘look, the previous government was irresponsible in cutting employee national insurance contributions, but let’s be frank, we were pretty irresponsible in saying we wouldn’t reverse it,’” King said.  

 

He suggested that undoing former Chancellor Jeremy Hunt’s 2p cut to employee national insurance contributions could allow Reeves to reconsider her increase in employer national insurance rates, which, he noted, has had unexpected consequences, even affecting charities.  

 

“I think it is possible to say to people, ‘maybe we said some silly things before the election, this is the situation Britain now finds itself in, and this is what we have to do in the next four to five years,’” King added. “I think people want politicians to be honest and give them a plan.”  

 

However, he cautioned that reversing the national insurance cut alone would not be sufficient. “In the long run, to raise enough money, I think we will have to raise the basic rate of income tax,” he said. “I see no harm in doing that, provided, and this is a clear condition, it is being used to finance a well thought-through programme of spending.”  

 

King also challenged Reeves’ self-imposed fiscal rules, which prevent borrowing to fund day-to-day government expenses and require that national debt must be falling as a percentage of the economy. He suggested that the chancellor should revise these constraints to allow for increased government spending.  

 

“The fiscal rules ought to be defined in terms of whether we think it is more likely than not that five years from now, the ratio of debt to national income will be able to fall,” King said. “That would enable her to say, if we have to spend more now and we don’t want to depress the economy in the next 12 months, we may have to borrow more in the next year. But in the rest of the parliament, we will find a way in which, through raising taxes and cutting out waste, we will be able to reach that target.”

 

Based on a report by The Independent  2025-03-01

 

 

[Bday Prang]

5 hours ago, Social Media said:

 

Mervyn King, the former governor of the Bank of England, has criticized Chancellor Rachel Reeves’ pre-election tax promises as “irresponsible” and warned that an increase in income tax will be necessary. King, who led the Bank from 2003 to 2013 and was once Reeves’ boss during her time there, argued that she made “silly” commitments on taxation before the general election and should reconsider them now that she is in government.  

 

During the campaign, Labour pledged not to increase VAT or income tax and refused to reverse a Conservative government decision to cut employee national insurance contributions. Economists at the time warned that this cut was unsustainable. However, in her first Budget, Reeves opted to raise employer national insurance contributions, aiming to generate around £25 billion annually.  

 

“I think it would have been better to have said in the Budget, ‘look, the previous government was irresponsible in cutting employee national insurance contributions, but let’s be frank, we were pretty irresponsible in saying we wouldn’t reverse it,’” King said.  

 

He suggested that undoing former Chancellor Jeremy Hunt’s 2p cut to employee national insurance contributions could allow Reeves to reconsider her increase in employer national insurance rates, which, he noted, has had unexpected consequences, even affecting charities.  

 

“I think it is possible to say to people, ‘maybe we said some silly things before the election, this is the situation Britain now finds itself in, and this is what we have to do in the next four to five years,’” King added. “I think people want politicians to be honest and give them a plan.”  

 

However, he cautioned that reversing the national insurance cut alone would not be sufficient. “In the long run, to raise enough money, I think we will have to raise the basic rate of income tax,” he said. “I see no harm in doing that, provided, and this is a clear condition, it is being used to finance a well thought-through programme of spending.”  

 

King also challenged Reeves’ self-imposed fiscal rules, which prevent borrowing to fund day-to-day government expenses and require that national debt must be falling as a percentage of the economy. He suggested that the chancellor should revise these constraints to allow for increased government spending.  

 

“The fiscal rules ought to be defined in terms of whether we think it is more likely than not that five years from now, the ratio of debt to national income will be able to fall,” King said. “That would enable her to say, if we have to spend more now and we don’t want to depress the economy in the next 12 months, we may have to borrow more in the next year. But in the rest of the parliament, we will find a way in which, through raising taxes and cutting out waste, we will be able to reach that target.”

 

Based on a report by The Independent  2025-03-01

 

 

I am not sure if she actually lied or if she just hasn't a clue what she's doing,  probably both

[Theforgotten1]

Same all government, say anything to get in ,then give the finger to the voters

[JonnyF]

They are liars.

 

They said whatever it took to gain power.

 

Now we see the face behind the mask. And it is incredibly ugly. 

[Chomper Higgot]

Perhaps Mervyn King has forgotten there is a range of other taxes that might very well be raised or indeed tax allowances that might be reduced and that Labour’s promise was not to raise income taxes for working people.

 

 

[RuamRudy]

There is a very interesting podcast by the economist David McWilliams who points out that many of the economic indicators in the UK are worse than Greece just before it was bailed out by the IMF - and suggests that we could be heading in that direction too.

 

 

 

 

[sandyf]

6 minutes ago, Chomper Higgot said:

Perhaps Mervyn King has forgotten there is a range of other taxes that might very well be raised or indeed tax allowances that might be reduced and that Labour’s promise was not to raise income taxes for working people.

You seem to have missed the point. The comment on being "irresponsible" was in respect of National   Insurance contributions.

The UK retirement pension was born from the 1948 National Insurance Act and no government should have been allowed to reduce NI contributions.

Why do you think the UK retirement pension is the lowest in the major economies.

[Watawattana]

1 hour ago, JonnyF said:

They are liars.

 

They said whatever it took to gain power.

 

Now we see the face behind the mask. And it is incredibly ugly. 

Jeez!  The mask was ugly!!  The face must be really bad!! 🤪

 

In my memory, every prospective government has lied to get it, then backtracked on most things when they have got in.  Or maybe they just saw reality under the hood when they got access to the real facts that the previous lot left behind.  Maybe a mixture.  I've got no political allegiance in the UK, they are all 💩.  It's just the depth that varies.

[Baht Simpson]

8 minutes ago, Watawattana said:

 

In my memory, every prospective government has lied to get it, then backtracked on most things when they have got in.

Like the Tories and student loans. 

[Watawattana]

10 minutes ago, Baht Simpson said:

Like the Tories and student loans. 

Yeah, good example.  I'm sure we could each quote dozens of broken promises, lies or partial lies across parties of all colours.  For balance, I'm sure we could both quote good stuff each party has done too.  But I'm fed up with all of them.

[digger70]

Former Bank of England Chief Warns Income Tax Hike is Inevitable, Criticizes Reeves’  Promise. 

 

Wouldn't it be better and look after the Tax payers money by spending that on their Own country people  instead of Giving all that money away to Aid Refugees and Asylum seekers ? 

Just look at the figures : 

The amount of aid spent on hosting refugees and asylum seekers in the UK continued to rise last year to £4.3 billion – up from £3.7 billion in 2022 – amid continuing value for money concerns, the aid watchdog finds today (Wednesday 10 April). This amounts to 28% of all UK aid in 2023.

[Briggsy]

The freezing of personal allowances, the reduction of the personal savings allowance, the reduction of the dividend allowance (and the increase in employer's NI for 1 million IR35 workers) are increases in income tax by the back door.

 

Most of these were announced by the previous Conservative government.

 

This is a very strange conspiracy to disincentivise work and incentivise either idleness or working in the black economy. Both major parties seem to be fully in on it. I can only explain this failed and illogical policy as cowardice stemming from the election cycle.

[thaibeachlovers]

If they didn't keep throwing billions into the Ukrainian black hole, perhaps they wouldn't need to raise taxes.

[henryford1958]

12 minutes ago, thaibeachlovers said:

If they didn't keep throwing billions into the Ukrainian black hole, perhaps they wouldn't need to raise taxes.

 

Would YOU rather be on the front line fighting Putin?

[thaibeachlovers]

20 hours ago, henryford1958 said:

 

Would YOU rather be on the front line fighting Putin?

Stupid question. I've always said right from the start of the fiasco that Ukraine could not win, and that it should never have started, so why would I support the war in any sense?

It's obvious to me that the CIA wanted a repeat of Afghanistan where they bleed Russia in a never ending war of attrition, using the locals as cannon fodder. I guess they didn't consider Trump actually winning and ending it.