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How have Labour’s financial pledges changed since the last manifesto and what are the fiscal trade-offs?
Executive summary
Labour’s 2024 manifesto pledged limited new net spending (about £1.8bn a year by 2028–29 for named items) and vowed not to raise income tax, employee National Insurance or VAT, while saying some green and capital programmes would be partly borrowed for — leaving an estimated shortfall of roughly £1bn between new spending and new revenue in the manifesto calculations [1] [2]. Since the election the government has already made fiscal choices that shift the burdens — notably changing employer National Insurance rates and using fiscal-rule adjustments and targeted spending pots — creating trade-offs between headroom for future shocks, business costs and delivery of ambitious manifesto promises [3] [4] [2].
1. What Labour promised on taxes and spending — the baseline
The manifesto presented itself as fiscally cautious: an explicit pledge not to raise income tax, employee NIC or VAT on “working people”, while setting out modest identifiable extra day-to-day spending of about £1.8bn a year by 2028–29 for specific pledges (eg, scans and mental-health staff) and saying some green prosperity spending could be financed by borrowing [1] [2]. The Institute for Government judged the manifesto’s spending appears to exceed new revenue by around £1bn and noted Labour intended borrowing for part of the green plan [2].
2. Key post-manifesto tax/charge changes and how they differ in form if not name
Although Labour committed not to increase taxes on working people, the government raised employer Class 1 National Insurance Contributions by increasing the employer rate and cutting the secondary threshold, offsetting some impact on small firms by upping the Employment Allowance — measures forecast to raise around £23.8bn in 2025/26 rising to £25.7bn by 2029/30 [3]. Commentators and bodies interpret this as a shift in the tax mix: keeping employee-facing rates the same while increasing employer-side charges that still raise business costs and revenues [3] [5].
3. Fiscal trade-offs: headroom vs. policy delivery
Treasury rhetoric has emphasised tight fiscal rules and building a buffer, but analysts and media have reported pressure to raise more revenue or cut spending to create larger headroom against those rules — with proposals under consideration that could involve “tax increases in the tens of billions” or sharper spending restraint [3]. That tension forces trade-offs: preserving market confidence and a fiscal buffer can limit room to meet manifesto ambitions such as ambitious housebuilding or service improvements [2] [1].
4. Distributional and economic trade-offs: who pays and who feels it
Shifting revenue to employers raises costs for firms, which surveys linked to plans around NIC and the National Living Wage have connected to hiring freezes and job losses — one cited fall was about 180,000 employees on payrolls in the year to October 2025, and employer surveys reported intentions to cut hiring [3]. Labour’s manifesto framing — “taxes on working people” — leaves room for different interpretations (eg, whether employer NICs count), so redistribution of tax incidence can produce political friction even when headline pledges are formally preserved [5] [3].
5. What’s been funded and what’s been deferred or scaled back
Implementation trackers and reporting show many manifesto pledges were being delivered or progressed in the first year, but some pledges have been changed in detail or deferred: for example, the government honoured a headline farm fund for 2024–26 but cut support thereafter; Full Fact finds only one clear unkept technical pledge so far (the National Wealth Fund capitalisation) while noting many commitments are “delivered or in progress” [4] [6]. Other big promises — such as 1.5m homes in five years — face practical delivery challenges and require sustained funding beyond the small annual amounts explicitly costed in the manifesto [7] [1].
6. How watchdogs and analysts frame the choices
The IFS and Institute for Government warned the manifesto relied on narrow margins and borrowing for some green pledges; they flagged that pledged day-to-day spending is small relative to total public services and that real-terms pressures in 2025 remain a risk [1] [2]. The Resolution Foundation and press coverage have pushed the Treasury to create larger fiscal buffers, noting that doing so would likely mean additional tax rises or spending cuts [3].
7. What remains unclear or contested in reporting
Available sources do not provide a full consolidated new costing table of every post-manifesto change; precise long-run offsets between changes (eg, employer NIC increases versus employment impacts) are contested, and some ministry-level trade-offs (which services will face real-terms cuts) are outlined only in part by commentators (not found in current reporting) [3] [2]. Where sources disagree — for instance on whether employer-side NICs violate the “spirit” of the manifesto pledge — the Institute for Government and Deloitte both note the legal preservation of employee rates while flagging practical and interpretive disputes [3] [5].
Conclusion — the practical framing
Labour has largely kept headline tax pledges in name while altering the fiscal mix and using borrowing selectively; that creates trade-offs between protecting a fiscal buffer, preserving business competitiveness, and delivering ambitious but only partly-costed manifesto programs. Watchdogs say the manifesto’s margins are thin and future choices will force tougher trade-offs between raising tens of billions in revenue or cutting public services [2] [3].