The £40bn question: How will Rachel Reeves balance the books?

Rachel Reeves is facing pressure to potentially break Labour’s manifesto pledge of not raising income tax or national insurance to fill a £40bn spending gap, warned after the chancellor revealed the need for £40bn in cuts and tax increases. The drop in inflation may hinder her revenue-raising efforts, leading to speculation of a £25bn tax increase in her upcoming Budget, with cuts to benefits and international aid also on the table. The Institute for Fiscal Studies director has cautioned that maintaining current tax rates may prove difficult, ultimately forcing Labour to raise income taxes.

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