UK treasury chief prepares ground for tax-hiking budget
British finance minister Rachel Reeves is signaling that she will increase taxes in her budget, arguing that the economy is in worse shape than the government predicted when it took office.
Three weeks before the Nov. 26 budget, Reeves made a highly unusual speech to brace voters and financial markets in case he broke his election promise not to raise income taxes or the sales tax.
“If we are to build Britain’s future together, we will all need to contribute to the effort,” he said on Tuesday, pointing to broad tax rises.
“Each of us must do our part for the security of our country and the brightness of its future.”
Reeves cited interest payments on Britain’s Stg2.6 trillion ($A5.2 trillion) national debt and a lower-than-expected productivity assessment by the government’s economic forecaster as factors behind their decision.
“The productivity performance we inherited from the last government is weaker than we first thought,” Reeves said.
“We put more in, we get out less.”
On top of that, “the world is throwing even more challenges our way,” including U.S. President Donald Trump’s tariffs, volatile supply chains and the rise in the cost of government borrowing, he said.
While many of the economic challenges are global, Reeves said Britain was particularly exposed due to high debt left by “years of economic mismanagement” by the Conservative Party, which has been in power for 14 years until 2024.
The British economy, the world’s sixth largest, has performed below its long-term average since the 2008-09 global financial crisis, and the centre-left Labor government elected in July 2024 has struggled to deliver the economic growth it promised.
Inflation remains stubbornly high and growth is slowing, frustrating efforts to repair worn-out public services and ease the cost of living.
Critics say Reeves is making things worse by being overly pessimistic and increasing taxes on businesses in his 2024 budget.
No details were given in Reeves’ speech about what taxes he plans to raise.
He said the budget would deliver “growth and justice” and focus on strengthening overstretched public health services, reducing the national debt and reducing inflation to improve the cost of living.
As well as preparing a budget that will have major implications for the country and government, Reeves faced criticism last week after a newspaper reported that he had broken the law by renting his London home without permission from the local authority.
He apologized for what he described as an inadvertent mistake and Prime Minister Keir Starmer said he would not take action.
Australia’s Associated Press is the beating heart of Australian news. AAP is Australia’s only independent national news channel and has been providing accurate, reliable and fast-paced news content to the media industry, government and corporate sector for 85 years. We inform Australia.
