Chancellor Rachel Reeves is expected to announce a reduction in National Insurance contributions for businesses to address worker shortages, as part of a broader budget aimed at boosting growth and living standards. The move comes as Reeves seeks to balance fiscal stability with Labour MPs' demands for investment.
The budget, described as a decisive moment for Keir Starmer's government, will include a rise in the minimum wage to £12.71 for over-21s from April, benefiting 2.4 million workers. The minimum wage for 18- to 20-year-olds will increase by 8.5% to £10.85 an hour.
Reeves will also freeze rail fares for the first time in 30 years, cut green levies on energy bills, and scrap the two-child benefit cap. However, she has abandoned plans for an income tax rise and will instead rely on smaller tax measures, including extending the freeze on income tax thresholds, limiting salary sacrifice schemes, and introducing a gambling levy.
The chancellor faces a £20bn spending gap, partly due to lower growth forecasts. To fill this, she will pencil in steep departmental cuts for the end of the parliament, reducing spending growth to 0.5% in 2029-30. Economists warn these cuts may be undeliverable, raising credibility concerns.
Reeves will tell MPs: 'I will take the fair and necessary choices to deliver on our promise of change. I will not return Britain back to austerity, nor will I lose control of public spending with reckless borrowing.' The budget is seen as a test of the government's ability to manage the economy and maintain party unity.
