Blitz Bureau
In her first Budget, Britain’s Finance Minister Rachel Reeves on October 30 announced the biggest tax increases in three decades, saying she had to repair the country’s broken public services with heavy spending.
Reeves, a former Bank of England economist, said that when the Labour Party came to power in July, they inherited a £22 billion shortfall in public finances.
Being the first female Chancellor of the Exchequer, she vowed no repeat of former Prime Minister Liz Truss’s unfunded tax cuts which caused a bond slump in 2022, according to Reuters.
Budget ‘black hole’
Reeves said she would raise taxes by £40 billion ($52 billion) a year, blaming the Conservatives for leaving her Labour Party with a budget “black hole”. “Any responsible Chancellor would take action,” she said. “That is why… I am restoring stability to our public finances and rebuilding our public services.”
In a post on X, she said, “Working people won’t face higher taxes in their payslips.” She painted a grim picture of record waiting times in the health service, children studying in crumbling schools and dysfunctional transport and justice systems.
“The Government is protecting working people’s living standards by raising the National Living Wage, cutting duty on draught pints, keeping bus fares down, and not increasing the main rates of income tax, employee national insurance, and VAT,” a ministry release said.
Public investment
“The Budget will help rebuild Britain by boosting public investment by over £100 billion over the next five years while exceeding the manifesto commitment to fix an extra 1 million potholes per year with an additional £500 million for local road maintenance in 2025-26,” it added. But in a setback for Reeves, Britain’s Budget watchdog said the economy would grow less than it previously thought in 2026-2028 after outperforming only slightly in 2024 and 2025.
The watchdog said higher public investment was likely to boost growth but mostly only in the 2030s. “This is, in some sense, the central trade-off of this budget,” Ben Zaranko, an economist with the Institute for Fiscal Studies think-tank, said. “Tens of billions of extra borrowing for investment might push up interest rates but that’s seen as a price worth paying for the long-term benefits.”
