Chancellor Rachel Reeves is set to announce a series of tax increases in her highly anticipated second Budget, as she confronts a significant shortfall in the UK's public finances.
The statement, delivered in the House of Commons, is expected to adopt a 'smorgasbord' approach to raising revenue, targeting multiple areas to address the financial challenges inherited from what the Chancellor described as "austerity, a chaotic Brexit and the pandemic."
Budget Priorities and Economic Context
In a filmed address ahead of the Budget, Ms Reeves acknowledged public frustration, stating that people are "angry at the unfairness in our economy." She outlined that her Budget would focus on three core priorities: cutting the cost of living, reducing NHS waiting lists, and managing the cost of debt.
The economic backdrop is challenging. Reports indicate that the Office for Budget Responsibility has downgraded its growth forecast for 2026 and every subsequent year until the next election in 2029, painting a difficult medium-term picture for the UK economy.
Key Announcements: Wages and New Tourist Tax
Alongside the expected tax measures, the Budget will bring positive news for low-paid workers. It was confirmed that from next April:
- The National Living Wage for workers aged 21 and over will rise by 4.1% to £12.71 an hour.
- The National Minimum Wage for 18 to 20-year-olds will see a larger increase of 8.5%, reaching £10.85 an hour.
In a significant move for local governance and tourism, mayors across England will be granted new powers to impose a 'modest' tourist tax on visitors staying in hotels, B&Bs, and holiday lets. The revenue generated is intended to be reinvested into local transport, infrastructure, and the visitor economy to attract more tourism in the long run.
A Chancellor's Tough Choices
Emerging from 11 Downing Street with her iconic red box, Chancellor Reeves signalled her readiness to make difficult decisions. She stated she 'will take the fair and necessary choices to deliver on our promise of change.'
While she pointed to early successes such as wages rising faster than inflation and a growing economy, she conceded that "the damage done was worse than we thought," setting the stage for a Budget defined by fiscal tightening and targeted support.
