Chancellor hints at reforms amid public discontent
Rachel Reeves acknowledged people are “angry at unfairness” in the British economy ahead of unveiling her second Budget on Wednesday, reports BritPanorama.
In a filmed address prior to the Budget, the Chancellor stated that the Government has begun to see positive results over the past year, with “wages rising faster than inflation, hospital waiting lists coming down, and our economy growing faster and stronger than people expected.”
“But I know there is more to do,” she added. “I know that the cost of living is still bearing down on family finances, I know that people feel frustrated at the pace of change, or angry at the unfairness in our economy.”
Reeves acknowledged the lasting impacts of austerity, Brexit, and the pandemic, noting, “the damage done from austerity, a chaotic Brexit and the pandemic were worse than we thought.” Yet, she expressed a willingness to confront these obstacles, asserting, “I’m not going to duck those challenges, and nor will I accept that our past must define our future. It doesn’t have to.”
She described the Budget as being for “the British people” and emphasized the Government’s commitment to working with citizens to “build a fairer, stronger and more secure Britain.”
The Chancellor indicated that she will use the Budget to introduce measures to tackle the ongoing cost-of-living crisis, while simultaneously seeking to retain support among backbench Labour MPs amid anticipated tax increases.
Reeves also aims to reduce Government debt, indicating she will look to increase fiscal leeway above her initial borrowing plans while maintaining fiscal credibility.
“Today I will take the fair and necessary choices to deliver on our promise of change,” she stated before the Budget. Moreover, she insisted, “I will not return Britain back to austerity, nor will I lose control of public spending with reckless borrowing.”
Reports suggest she plans to adopt a “smorgasbord” approach to raising taxes, having previously dropped plans to increase the headline rate of income tax, which would have violated a Labour manifesto pledge.
Although the income tax rate increase has been shelved, a freeze on income tax thresholds is under consideration, potentially resulting in more individuals becoming taxpayers as wages rise.
Additionally, Reeves is examining limits on how much employees can contribute to pensions under salary sacrifice schemes before incurring national insurance liabilities.
Other tax measures being considered include a “mansion tax” on properties valued over £2m, a gambling levy, and a pay-per-mile charge for electric vehicles.
Earlier this week, she confirmed to Labour MPs that cutting the cost of living would be a priority; she is expected to scrap the two-child benefit cap, projected to cost between £3bn and £3.5bn by the end of the Parliament.
Moreover, reports suggest a continued freeze in fuel duty is on the table, potentially incurring an additional £3bn cost.
On Tuesday, she announced acceptance of the Low Pay Commission’s recommendations to raise the minimum wage, which equates to a £900 annual pay increase for full-time workers over the age of 21.
Farmers are set to protest outside Westminster on Budget day regarding inheritance tax, although they have been banned by the Metropolitan Police from bringing their tractors.
This Budget presents a crucial moment for the government as it attempts to balance fiscal responsibility with pressing public needs. Reeves’ focus on addressing the cost-of-living crisis reflects a recognition of the financial strain faced by many households, while her approach to tax policy indicates a complex navigation of political promises and economic realities. The outcomes will significantly impact the government’s credibility and the public’s perception of its priorities.
