Chancellor Rachel Reeves has openly recognised the widespread public anger and frustration surrounding economic inequality as she prepares to implement further tax increases in her upcoming Budget announcement.
Budget Measures Target Revenue Boost
The Chancellor is widely anticipated to extend the freeze on personal tax allowances for an additional two years, a move that will have significant consequences for British taxpayers. According to analysis from the Institute for Fiscal Studies, this extension is projected to raise approximately £8.3 billion annually by 2029-30.
This threshold freeze means that as wages increase above the £12,570 personal allowance limit, nearly 960,000 more people will be dragged into paying income tax. Furthermore, around 790,000 additional individuals will find themselves paying the higher 40p tax rate. Pensioners may also face unexpected tax burdens as the new state pension is set to rise above the threshold level.
Chancellor Addresses Public Concerns
In a filmed statement delivered ahead of the Budget, Ms Reeves acknowledged the government had made progress during the past year, noting that wages have been rising faster than inflation, hospital waiting lists are decreasing, and economic growth has exceeded expectations.
"But I know there is more to do," she conceded. "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."
The Chancellor attributed some of the current challenges to historical factors, stating: "I have to be honest that the damage done from austerity, a chaotic Brexit and the pandemic were worse than we thought."
Wide-Ranging Tax Measures Under Consideration
The Budget is expected to feature what political commentators are describing as a "smorgasbord" approach to taxation, with multiple revenue-raising measures under consideration:
- Potential limits on pension contributions through salary sacrifice schemes
- A proposed "mansion tax" targeting properties valued over £2 million
- Implementation of a new gambling levy
- Introduction of pay-per-mile charging for electric vehicles
In a significant welfare policy shift, Ms Reeves is expected to scrap the controversial two-child benefit cap, a measure estimated to cost between £3 billion and £3.5 billion by the end of the current Parliament.
Meanwhile, several newspapers have reported that the Chancellor is considering maintaining the fuel duty freeze, which would represent a £3 billion cost to the Treasury.
The Chancellor has emphasised her commitment to avoiding a return to austerity while maintaining fiscal responsibility. "I will not return Britain back to austerity, nor will I lose control of public spending with reckless borrowing," she stated. "And I will push ahead with the biggest drive for growth in a generation."
This Budget comes after Ms Reeves recently abandoned plans to increase the headline rate of income tax, which would have constituted a breach of Labour's manifesto commitment. The decision followed economic forecasts that proved less severe than initially feared.
Shadow chancellor Sir Mel Stride has criticised the approach, noting: "Having already raised taxes by £40 billion, Reeves said she had wiped the slate clean, she wouldn't be coming back for more and it was now on her. A year later and she is set to break that promise."
The Budget announcement occurs against a backdrop of a forecast economic growth slowdown, compelling the government to seek additional revenue streams while attempting to maintain support from backbench Labour MPs and address public concerns about economic fairness.
