Philip Hammond 'could axe key Tory tax pledge to fund NHS boost'

Posted On: 
10th October 2018

A key Conservative tax pledge could be in danger as Philip Hammond tries to fund a major NHS cash boost at this month's Budget, it has emerged.

The Chancellor is said to have told officials that nothing is "off the table" ahead of the Budget.

The Chancellor has reportedly told officials at the Treasury that "nothing is off the table" to make good on the £26bn-a-year injection of NHS funds promised by Theresa May.

Both the Financial Times and the Daily Mail report that a Conservative manifesto pledge to lift more people out of income tax could be delayed or even scrapped entirely in order to meet the NHS commitment.

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The party's 2017 manifesto vowed to raise the threshold for the 20p rate of income tax to £12,500 and the 40p rate to £50,000.

The Tories said the move was part of a "firm intention to reduce taxes on Britain’s businesses and working families".

But the FT reports that freezing the rates could raise around £2bn a year for the Treasury, with officials told to make the health service their "number one priority".

A senior Tory source meanwhile told the Mail: "If you are looking for guidance on tax policy I would not look to the manifesto."

They added: "We will always be a party of low tax. But the Prime Minister’s priorities have changed. We have made a huge spending commitment here, which will be transformational for the NHS. But it has to be paid for and the Budget will reflect that."

The move has already been criticised by former minister Robert Halfon, who said it was "absolutely vital" for the Tories to cut the cost of living for people on low incomes.

"That should be our number one priority for government and it is hard to see how you would square that with abandoning this promise," he told the Mail.

The Chancellor is also reportedly considering a major shake-up of VAT rules for small companies, reducing the threshold at which they pay the tax from £85,000 to £43,000.

The Treasury is meanwhile said to be mulling a crackdown on pension tax reliefs, with a source saying the £40,000 annual allowance was "primarily enjoyed by rich people".