UK’s treasury chief to unveil another tax-heavy budget
British finance minister Rachel Reeves is expected to announce new tax rises, possibly worth tens of billions of pounds, in a budget that puts her credibility in line with financial markets and MPs demanding more welfare spending.
Just over a year after ordering a Stg40 billion (A$81 billion) tax increase that he promised would be the biggest and one-off since the 1990s, Reeves has been forced to look at further revenue-raising measures amid an expected decline in Britain’s economic prospects and higher debt costs.
Reeves said he held “fair and necessary elections” to improve the country and accelerate economic growth, but he was aware of the unhappiness among voters.
“I know people are frustrated with the pace of change or angry about the injustice in our economy,” he said.
“I have to be honest that the damage from austerity, chaotic Brexit and the pandemic is worse than we thought.”
Reeves said it would help families with living expenses, shorten hospital waiting lists and reduce debt.
“I will not take Britain back to austerity or lose control of public spending by borrowing recklessly,” he said.
Economists expect a tax increase of between Stg 20 billion and Stg 30 billion when he addresses parliament on Wednesday.
But given Britain’s slow economic growth and increasing public spending demands, from rising defense costs to an aging population, this may not be enough to keep public finances balanced.
An inconclusive budget could fuel speculation about the future of Prime Minister Keir Starmer, who is faltering in opinion polls despite the centre-left Labor Party’s massive election victory in 2024.
In his first budget of 2024, Reeves said he had brought stability to public finances after the shocks of Brexit, the coronavirus pandemic and former Conservative prime minister Liz Truss’ “mini-budget” crisis.
But these plans are likely to be hampered by Britain’s economic outlook being downgraded by government fiscal forecasters who have been overly optimistic about productivity growth for years.
It is expected to bring more workers into the income tax net and enable more workers to pay higher rates by extending the freeze on threshold levels; It’s something he said he wouldn’t do because of the hit it would bring to households.
Owners of expensive homes and gamblers are likely to pay more taxes, electric car drivers will reportedly face a new mileage charge, and the generosity of pension incentives is likely to be reduced, among other measures.
Investors say Reeves must quickly come up with convincing tax increases that will raise revenues.
Adding to the headache for Reeves are calls from Labor MPs for an end to the two-child limit on family benefits; This could contribute around Stg3 billion per year to government spending.
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.
