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Rachel Reeves is unlikely to raise the basic rates of income tax and national insurance in order to avoid breaking a promise to protect “working people” in the budget.
It comes as Sky News has obtained an internal definition of “working people” used by the Treasury.
Officials have been tasked with protecting the income of the lower two-thirds of working people, meaning in theory people earning more than around £46,000 could face a squeeze in the budget.
However, this is likely to rule out increases to the basic rate of income tax and national insurance, since they would pay more tax.
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Rachel Reeves is unlikely to hike these taxes because the Treasury says those earning £45,000 or less qualify as “working people”.
Sky News understands that ministers are still considering whether to break manifesto pledges, and these options remain on the table.
The main elements of the budget must be finalised by the middle of November, in the next two to three weeks.
Rachel Reeves is facing a black hole in the budget that could exceed £35bn, after the latest Office for Budget Responsibility (OBR) forecast came in worse than expected.
The OBR had been anticipated to downgrade expected future productivity rates by 0.1% or 0.2% of GDP.
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