If you're on £46,000 you're in Reeves' sights: Chancellor vowed not to raise tax for 'working people' but wouldn't say what that meant...now we know
Rachel Reeves is targeting workers earning £46,000 a year or more in this month's Budget, as she struggles to fill a £40 billion hole in the public finances – while claiming to keep her promise not to increase taxes on 'working people'.
The Tories have seized on claims by Whitehall sources that the Treasury had solved the conundrum by defining 'working people' as those in the bottom two-thirds of earnings, which equates to a salary of £45,000 or less.
That effectively brands the top third of earners as 'wealthy' – encompassing jobs such as HGV drivers, teachers and head chefs at the Wagamama restaurant chain.
Tory Shadow Business Secretary Andrew Griffith accused the Chancellor of planning to 'further massacre the take-home pay of millions of hard-working middle earners'.
'While boosting the pay of their union paymasters, Labour don't understand or care about those who get up and work hard to make a better life,' he said.
Sir Keir Starmer has struggled to define a 'working person' since his election pledge not to increase taxes on them.
At one point he said that it referred to someone who 'goes out and earns a living' and can't 'write a cheque to get them out of difficulty'.
By defining the term by salary, the Treasury could ensure that rises in income tax or National Insurance in the Budget on November 26 only kick in at £46,000 or more.
Rachel Reeves is targeting workers earning £46,000 a year or more in this month's Budget , as she struggles to fill a £40 billion hole in the public finances – while claiming to keep her promise not to increase taxes on 'working people'
However, this will affect 7.2 million workers, including teachers with three years' experience, mental health nurses with under two years' experience, construction site managers, manufacturing engineers, yoga instructors, life coaches and captains in the British Army.
When asked if higher taxes on the wealthy would feature in her statement, Ms Reeves said: 'That will be part of the story.'
Potential tax rises include a raid of as much as £4 billion on pension perks for higher earners and a 20 per cent charge on Britons leaving the UK for tax havens, which would raise about £2 billion.
It comes after claims that as many as 16,500 millionaires would leave the UK this year in response to tax changes and a lack of confidence in the economy.
Shadow justice secretary Robert Jenrick said the move was a 'crazy' idea that would 'just see wealth and wealth creators sprint for the door'.
'We need more entrepreneurs, not fewer,' he added. 'Reeves must rule out this latest desperate move.'
Professor Andy Summers, of the Centre for Analysis of Taxation, which proposed the policy, said the idea had been made possible by Brexit.
'In the past... the ability to levy a settling-up charge was restricted by EU rules on freedom of movement,' he added.
Tory Shadow Business Secretary Andrew Griffith accused the Chancellor of planning to 'further massacre the take-home pay of millions of hard-working middle earners'
'But those rules no longer apply, so we could do what Australia and Canada do, along with most other European countries, now those restrictions have been relaxed.'
As part of her pensions raid, Ms Reeves could strip back tax breaks offered to staff and employers who pay money into workplace pensions by targeting so-called 'salary sacrifice' schemes.
These allow workers to put money into their retirement pots before it is subject to any income tax or National Insurance.
Last week, The Mail on Sunday revealed that the Chancellor is drawing up plans to impose a 'mansion tax' on houses worth £2 million or more.
Officials are still debating whether to do this through an annual levy or through additional, higher council tax bands.
Economists have warned that Ms Reeves is preparing to raise taxes faster than any chancellor in more than half a century.
Capital Economics said that she could increase levies by as much as £38 billion in the Budget, on top of the £41.5 billion she raised last year.
Torsten Bell, the Treasury Minister who is leading the Budget preparations, has previously argued for sweeping reforms, including 'matching higher taxes with better taxes'.
A Treasury spokesman said: 'We do not comment on speculation around tax changes outside of fiscal events.'
