Britain’s Labor government prepares to deliver crucial first budget

Released: 30.10.2024 – 04:54Changed: 30.10.2024 – 04:52

2 min

The long-awaited budget update – the first under a centre-left government after 14 years of Conservative rule – is crucial to Starmer’s mission to revive the British economy.

But to do this, he said, a number of “difficult decisions” will have to be made.

The government has confirmed the budget will include tax hikes, government spending cuts and changes to fiscal rules to allow billions more to be borrowed for investment.

Finance Minister Rachel Reeves, who will present the Budget to Parliament on October 30, has promised “iron discipline” in public finances.

Criticism of the government is already mounting for scrapping the winter fuel relief scheme for millions of pensioners, with a recent YouGov poll showing only 18 per cent of the public approve of how it works.

– Changes in fiscal rules –

The government has vowed to address what it says is a £22 billion ($28.6 billion) black hole in public finances inherited from the previous Tory government.

With UK public sector borrowing already back to levels last seen in the 1960s, Reeves will shake up Britain’s fiscal rules to allow it to borrow billions more to finance public sector investment.

Starmer has already announced a series of measures that will be included in Wednesday’s Budget as he seeks to fix “collapsing” public services and “stagnant” living standards.

The government is committed to spending £240 million to roll out local services to help people get back to work.

It will also extend the bus fare limit until next year, but raise it from £2 to £3.

Reeves announced that £1.4 billion would be allocated to rebuilding schools and £1.8 billion would go towards publicly funded childcare.

She also said she would triple investment in breakfast clubs.

The NHS is expected to receive significant support, but Reeves warned on Tuesday that the budget alone could not “repair 14 years of damage” to the service.

Taxes are going up

The government has promised not to raise taxes on “working people”, which rules out increases in national insurance, income tax and VAT.

However, to deliver on this promise, Starmer confirmed other taxes would need to rise.

“Nobody wants higher taxes, just as nobody wants government spending cuts, but we have to be realistic about where we are as a country,” he said in a speech Monday.

Reeves is expected to raise national insurance contributions for employers, rather than employees, by at least one percentage point in the budget.

Analysts also predict higher capital gains taxes and reform of inheritance taxes.

The move has already drawn criticism from the opposition party.

“She has promised not to raise taxes, and tomorrow she is planning the biggest tax rise budget in history,” Conservative Party spokesman Jeremy Hunt said in the House of Commons on Tuesday.

In addition to the budget, the government’s budget watchdog, the Office for Budget Responsibility (OBR), will provide revised forecasts for UK economic growth.

© 2024 AFP