Chancellor Rachel Reeves has acknowledged widespread public anger over the "unfairness" in the British economy, just hours before she is set to unveil her second Budget on Wednesday.
In a filmed address, the Chancellor stated that the Government has begun to see positive results over the past year, pointing to wages rising faster than inflation, falling hospital waiting lists, and an economy growing faster and stronger than anticipated.
"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."
A Legacy of Challenges
Ms Reeves was frank about the scale of the problems inherited by the Government, stating she had to be honest that the damage from austerity, a chaotic Brexit, and the pandemic was worse than initially thought.
However, she struck a defiant tone, vowing not to "duck those challenges" and rejecting the idea that the past must define the nation's future. She described the upcoming Budget as one for "the British people," focused on building a "fairer, stronger and more secure Britain."
Budget Measures: Tax Rises and Targeted Support
With the Government aiming to maintain fiscal credibility and keep its backbench MPs on side, the Chancellor is expected to pursue a strategy of increasing her fiscal headroom. Having ruled out major spending cuts and a headline income tax rise that would break a manifesto pledge, a series of other tax increases is anticipated.
Reports suggest a "smorgasbord" approach, including:
- A continued freeze on income tax thresholds, dragging more people into higher tax brackets as wages increase.
- Limits on pension contributions via salary sacrifice schemes for National Insurance purposes.
- A potential "mansion tax" on properties valued over £2 million.
- A new gambling levy and pay-per-mile charging for electric vehicles.
Despite these revenue-raising measures, the Budget will also feature significant spending. Ms Reeves is expected to scrap the two-child benefit cap, a move costing an estimated £3 billion to £3.5 billion by the end of the Parliament.
Other cost-of-living measures include a continued freeze on fuel duty and a rise in the minimum wage, following the Low Pay Commission's recommendations, which will mean a £900-a-year pay rise for full-time workers over 21.
Ms Reeves concluded her pre-Budget remarks by promising "fair and necessary choices" to deliver on the promise of change, ruling out a return to austerity while also promising to avoid "reckless borrowing." She pledged to push ahead with "the biggest drive for growth in a generation."
Meanwhile, farmers are planning to protest in Westminster over inheritance tax, though the Metropolitan Police have banned them from bringing their tractors.
