A raft of tax rises is expected in the budget this lunchtime – with the chancellor acknowledging that voters are “angry at the unfairness in our economy”.
In a newly released video, Rachel Reeves said the public is “frustrated at the pace of change” – but vowed to “take the fair and necessary choices” to tackle the cost of living crisis.
And in a dig at the Conservatives – especially former prime minister Liz Truss – she pledged not to impose austerity, lose control of public spending, or engage in more reckless borrowing.
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Tax rises: What we know so far
Taxation will be a dominant part of the budget as Ms Reeves tries to plug an estimated £30bn black hole in the public finances.
A headline measure is expected to be an extension of the freeze on income tax thresholds for another two years beyond 2028, which should raise about £8bn.
But given the chancellor had ruled out such a measure last year – because it would “hurt working people” and “take more money out of their payslips” – this will attract criticism from opposition parties.
The chancellor has backed away from raising income tax rates outright, a move that would have breached Labour’s manifesto, but she still needs to find the cash to pay for her public spending plans.
Some measures already confirmed by the government include:
• Allowing local authorities to impose a levy on tourists staying in their areas
• Expanding the sugar tax levy to packaged milkshakes and lattes
• Imposing extra taxes on higher-value properties
It is being reported that the chancellor will also put a cap on the tax-free allowance for salary sacrifice schemes, raise taxes on gambling firms, and bring in a pay-per-mile scheme for electric vehicles.
Setting the scene ahead of the budget at 12.30pm, Ms Reeves said she will “push ahead with the biggest drive for growth in a generation”, promising investment in infrastructure, housing, security, defence, education, and skills.
Although she has vowed not to “duck challenges” nor “accept that our past must define our future”, she admitted that “the damage done from austerity, a chaotic Brexit, and the pandemic were worse than we thought”.
11am – Sky News special programme starts.
About 11.15am – Chancellor Rachel Reeves leaves Downing Street and holds up her red box.
12pm – Sir Keir Starmer faces PMQs.
12.30pm – The chancellor delivers the budget.
About 1.30pm – Leader of the Opposition Kemi Badenoch delivers the budget response.
2.30pm – The independent Office for Budget Responsibility (OBR) holds a news conference on the UK economy.
4.30pm – Sky News holds a Q&A on what the budget means for you.
7pm – The Politics Hub special programme on the budget.
The fiscal black hole is down to several factors – including a downgrade in the productivity growth forecast, U-turns on cuts to benefits and the winter fuel allowance, as well as “heightened global uncertainty”.
Nonetheless, the chancellor has promised more investment to cut NHS waiting lists, deal with “waste in the public sector”, and reduce the national debt.
“This budget is for you, the British people. So that together we can build a fairer, stronger, and more secure Britain,” she said.
Conservative shadow chancellor Sir Mel Stride has said Ms Reeves is “trying to pull the wool over your eyes” – having promised last year that she would not need to raise taxes again.
Meanwhile, Liberal Democrat deputy leader Daisy Cooper has accused her and the prime minister of “yet more betrayals”.
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What could her key spending announcements be?
As well as filling the black hole in the public finances, these measures could allow the chancellor to spend money on a key demand of Labour MPs – partially or fully lifting the two-child benefits cap, which they say will have an immediate impact on reducing child poverty.
Benefits more broadly will be uprated in line with inflation, at a cost of £6bn, The Times reports.
In an attempt to help households with the cost of the living, the paper also reports that the chancellor will seek to cut energy bills by removing some green levies, which could see funding for some energy efficiency measures reduced.
Other measures The Times says she will announce include retaining the 5p cut in fuel duty, and extending the Electric Car Grant by an extra year, which gives consumers a £3,750 discount at purchase.
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The government has already confirmed several key announcements, including:
• An above-inflation £550 a year increase in the state pension for 13 million eligible pensioners
• A freeze in prescription prices and rail fares
• £5m to refresh libraries in secondary schools
Extra funding for the NHS will also be announced in a bid to slash waiting lists, including the expansion of the “Neighbourhood Health Service” across the country to bring together GP, nursing, dentistry and pharmacy services – as well as £300m of investment into upgrading technology in the health service.
And although the cost of this is borne by businesses, the chancellor will confirm a 4.1% rise to the national living wage – taking it to £12.71 an hour for eligible workers aged 21 and over.
For a full-time worker over the age of 21, that means a pay increase of £900 a year.
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Britons facing ‘cost of living permacrisis’
However, the Tories have hit out at the chancellor for the impending tax rises, with shadow chancellor Sir Mel Stride saying in a statement: “Having already raised taxes by £40bn, Reeves said she had wiped the slate clean, she wouldn’t be coming back for more, and it was now on her. A year later and she is set to break that promise.”
He described her choices as “political weakness” – choosing “higher welfare and higher taxes”, and “hardworking families are being handed the bill”.
The Liberal Democrat deputy leader Daisy Cooper is also not impressed, and warned last night: “The economy is at a standstill. Despite years of promises from the Conservatives and now Labour to kickstart growth and clamp down on crushing household bills, the British people are facing a cost-of-living permacrisis and yet more betrayals from those in charge.”
She called on the government to negotiate a new customs union with the EU, which she argues would “grow our economy and bring in tens of billions for the Exchequer”.
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Green Party leader Zack Polanski has demanded “bold policies and bold choices that make a real difference to ordinary people”.
The SNP is calling on the chancellor to “help families” rather than “hammer them with billions of pounds of cuts and damaging tax hikes that destroy jobs and hurt economic growth”.
