UK Government Retreats on Income Tax Hike, Exposing Fiscal Weakness and Market Anxiety

As Britain’s Labour government backtracks on raising income taxes, financial markets are sounding alarm bells over the country’s economic future. The collapse of Chancellor Rachel Reeves’ plan to hike the basic rate of income tax—likely the first such move in half a century—has investors uneasy about the government's readiness to make tough fiscal choices.The pound weakened against the dollar by 0.4%, while yields on UK government bonds climbed sharply, signaling increased risk premiums demanded by investors wary of public finance mismanagement. This reaction underscores how political concerns over voter backlash are undermining essential economic reforms.When Political Calculations Trump Fiscal Responsibility,...