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Rachel Reeves Will face further questions after giving Budget This raised taxes by £26 billion but was eclipsed by an unprecedented leakage.
kept the Chancellor’s decisions Britain The tax burden is poised to surge to record levels as he hikes taxes as weak economic forecasts leave holes in his previous spending plans.
The increase is also needed to pay for increased welfare spending, with Ms Reeves announcing the scrapping of the two-child benefit cap, which is expected to lift 450,000 children out of poverty.
After abandoning plans for an income tax increase that would kill the manifesto, chancellor Opted for a series of small tax increases to pay for government spending and create a larger buffer against its borrowing rules.
These include a new pay-per-mile tax for electric vehicles, an increased tax on online betting and a so-called “mansion tax” on homes worth more than £2 million.
But it continued to face accusations of breaking Labour’s election promise not to raise taxes on “working people” after deciding to keep the tax threshold frozen until 2030/31 and impose national insurance on some pension contributions.
Ms Reeves tried to defend herself at a press conference on Wednesday, saying the manifesto was “very clear that income tax, national insurance and VAT rates” would not be increased.
But she added: “I’m not going to get into the semantics. I believe we are asking people to contribute more by withholding those allowances.”
While the Chancellor will face questions from the media on Thursday, economists from the influential Institute for Fiscal Studies (IFS) and the Resolution Foundation think tank will give their full verdict on his budget.
In its initial response, the Resolution Foundation warned of the impact on living standards after the Office for Budget Responsibility (OBR) said the threshold freeze had contributed to a decline in forecasts for real household disposable income.
And experts said taxing pension contributions would reduce workers’ take-home pay and leave many saving even less for their retirement.
Ruth Curtis, chief executive of the Resolution Foundation, called the Chancellor’s budget “front-footed – and front-loaded” on the cost of living, but argued that Ms Reeves’ decision to stick to her “manifesto tax pledge” has harmed millions of people on low-to-middle incomes.
“More than half a million large households will get a big boost in income next spring, while typical energy bills will be cut by around £130 a year for the next three years, although support will end after that,” he said.
“Sensitive tax reforms would also help flatten the tax treatment of income. But, ironically, sticking to their manifesto tax pledge has harmed millions of low-to-middle income earners who would have been better off by increasing tax rates if their thresholds were frozen.”
He said the Chancellor had “taken steps to repair the public finances” by “more than doubling the headroom against his fiscal rules” but warned that debt was rising and “fiscal repair work has been put on hold for three years”.
Meanwhile, the IFS described the budget as a “spend now, pay later” announcement, saying Ms Reeves was relying “heavily” on a tax increase just before the next election and expressing “doubt” about whether it would be implemented.
Conservative leader Kemi Badenoch said the budget was a “complete disgrace” to Rachel Reeves and that “if she had any decency she would resign”.
But the budget announcement was overshadowed by an unprecedented blunder, which saw the OBR publish its assessment of the economy and the Chancellor’s plans before Ms Reeves had even begun her speech.
The OBR apologized, attributing it to a “technical error”, and its chairman Richard Hughes said it had launched an internal investigation “to get to the root causes and ensure this does not happen again”.
The inquiry will report to the OBR’s oversight board, the Treasury and the Commons Treasury Committee and Mr Hughes said he would “follow the recommendations” – including whether they suggest he should step down.