Reeves will raise taxes to ‘rebuild’ UK amid tough first Budget

Rachel Reeves will pledge to “rebuild Britain” in her first budget. It is a historic moment that will include a major package of tax rises and more borrowing that is likely to shape British policy for the rest of the decade.

Reeves, the first female Chancellor of the Exchequer in the job’s 800-year history, is expected to propose about £35 billion to the House of Commons on Wednesday in the form of tax rises and spending cuts, as well as a revised budget rule to give her room to borrow more money for public investment.

“The only way to stimulate economic growth is to invest, invest, invest,” Reeves was expected to say in her financial report, according to remarks previously briefed by Britain’s ruling Labor Party. “The prize on offer today is enormous.”

It’s a worrying moment for both Reeves and Prime Minister Keir Starmer as they seek to recover from a slump in polls since Labor came to power in July and try to secure another election victory in five years’ time. The centerpiece of Reeves’ plan is to raise taxes to plug the £22 billion budget hole she says she inherited from the previous Conservative administration, as well as fund additional spending on public services including the National Health Service and childcare.

However, raising taxes is politically risky due to the Labor Party’s repeated election pledges not to increase fees beyond the limited amount set out in its manifesto. The government is bracing for criticism that it must break its pledge not to raise taxes on “working people” as Reeves intends to increase the national payroll tax on companies, which small business owners also pay.

The Treasury Department said Tuesday that the minimum wage will rise 6.7% next year, bringing inflation down, a move that helps Reeves argue that working people are protected.

Other measures expected in the budget include:

Another potential risk for Reeves is how markets will react to her plan to increase government borrowing to invest in capital projects. The chancellor said she would change the debt target for one of the government’s budget rules, which requires the share of debt in the economy to fall after five years, potentially giving it the ability to borrow up to extra pounds. 70 billion over the Labor Party’s term.

Britain’s borrowing costs have risen in anticipation of more debt issuance, and markets are closely watching details of its investment plans.

Reeves will draw parallels with other notable budgets in Labour’s history, citing the challenges it faced in 1945, 1964 and 1997 as comparable moments when the party also came to power after a period of opposition.

“This is not the first time the Labor Party has had to rebuild Britain,” Reeves is expected to deliver her statement. “Today it is up to the Labor Party, this Labor government, to rebuild Britain again.”

This article was created from an automated news agency feed without modifications to the text.