******EXCLUSIVE****** Rachel Reeves received an improved fiscal forecast from her budget watchdog putting the fiscal hole at £20 billion, leading her to drop plans to raise income tax rates, people familiar with the matter said. The latest update from the Office for Budget Responsibility moved in a significantly better direction due to the strength of receipts and stronger wage performance.  As well as filling the £20 billion gap, Reeves is still expected to deliver headroom against her fiscal rules of between £15 billion and £20 billion. An expected productivity downgrade from the OBR has been partially countered, the people said. Reeves’ strategy for budget has not changed and major tax rises are still expected to fill the remaining hole in the public finances, they added. Reeves will likely lower income tax thresholds at the budget and raise significant taxes from salary sacrifice schemes, they said. The chancellor was prepared to break Labour’s election promise not to raise income tax rates if necessary to fill the hole, but the better fiscal forecast now meant that was not necessary, the people said.