Kemi Badenoch has warned taxpayers that Labour is “coming after your pay packet” in today’s Budget. The Conservative leader said painful tax rises are inevitable because Andy Burnham and John Healey have “bottled” taking the tough decision to slash welfare.
Her attack comes as the Chancellor is poised to unleash a round of increases and “stealth raids” as he battles increasingly desperate public finances and global economic turmoil.
Badenoch's warning
Writing exclusively in the Express, Mrs Badenoch warned millions of Britons will “pay the price” because he is too “frightened” to make the right decisions for the country. “He goes on and on about making tough decisions, but where are they?” she warns.
“Labour knows the welfare system is broken. It knows too many people are being left on benefits when they could be helped into work. Yet whenever reform becomes politically uncomfortable, ministers bottle it.”
The Tory chief said that business, families and Britain’s armed forces will suffer because of the Chancellor’s inaction. Warning it will be a Budget to “appease Labour MPs” but “ends up costing everyone else”, she added: “John Healey has the ability to tackle welfare spending and find the money for defence, now. Not in the future, not at the delayed spending review, not on the tenth of never.
“He can choose to face down his backbenchers instead of coming after your pay packet. Today, we will discover whose interests he puts first.”
Economic pressure
Mr Healey’s debut Budget comes amid growing warning signs about the UK economy. Government debt has exceeded £3trillion and the Treasury spent £10.9billion servicing the interest in September alone.
Meanwhile, economists have warned that the fallout from the war in Iran has shrunk fiscal headroom to a third of what it was in the spring. The Institute for Fiscal Studies said the Chancellor faced a £35billion shortfall to maintain existing spending policies and to boost defence funding.
Inflation is soaring, with steep energy price hikes driving up the cost of living, while the job market is in turmoil as firms hold off hiring.
Chancellor's response
In a video message last night, Mr Healey said he is planning to announce some key measures to provide “breathing space” to hard-pressed Brits. “The world’s a highly uncertain place,” he said.
“Conflicts abroad are pushing up energy prices, and the cost of living here at home - piling pressure on the families, on businesses, and on our public finances. So, this Budget is designed to give households breathing space from some of the everyday costs, provide targeted support for businesses and self-employed people, and to start the long-term action needed to get energy costs down for good.”
Mr Healey vowed to back business, drive growth and boost national security and Britain’s defences. “We’ll do all of this responsibly, sticking within tight fiscal rules, and make sure every pound is well invested,” he added. “Because this Budget is about getting through this difficult moment. But it’s also about putting Britain on a future path, a better future path.”
Expected measures
Measures expected to be unveiled by the Chancellor include energy bills support for poorer households, a freeze to fuel duty, action to help first-time buyers, and tax relief for smaller businesses. He is set to bring in cash to fund these moves by launching a fresh raid on banks and a new crackdown on online retailers such as Amazon, eBay and Temu.
There is expected to be some help for pensioners in the Budget, just weeks after Mr Burnham said he wanted to axe the Triple Lock. The Chancellor is poised to introduce a new tax allowance for low-income pensioners due to be dragged into the tax system for the first time. But his plans to increase the tax-free amount for pensioners with no other income to £13,036 has already faced criticism, with experts warning risks creating a “cliff-edge” where some older people surviving on modest incomes would end up worse off.
Mr Healey is not expected to make any major changes to income tax thresholds, which means the Government’s “stealth raid” is set to continue. The personal allowance, the point at which most workers begin to pay tax, has been frozen at £12,570 since 2022. In last November’s Budget, Rachel Reeves announced the freeze on the personal allowance, as well as income tax thresholds, was due to continue until 2031.
Amid rising inflation, freezing income tax thresholds and the personal allowance has created so-called “fiscal drag”. This is where people getting pay rises to deal with inflation are pushed into higher tax brackets, eroding their real-terms pay.
The Chancellor is set to add 2p to the cost of a pint in a fresh blow for drinkers. Mr Healey is expected to announce an increase in alcohol duty, despite pleas from pub chains and trade bodies to freeze the tax. However, he is likely to freeze fuel duty and keep the 5p discount amid soaring pump prices caused by the Iran war.
There is also likely to be help for households grappling with energy bills forecast to surge to an average of more than £2,000 a year from January. Ofgem’s energy price cap rose to £1,723 for a typical household on October 1, but forecasters are predicting an even steeper rise at the beginning of next year. The Chancellor is said to be planning a boost to the warm homes discount to provide some relief to the poorest households, but this is only available to those in receipt of benefits.
Ahead of the Budget, Mr Healey and Mr Burnham have unveiled a series of “everyday fixes” to help people through the cost of living crisis. These include ending a cliff edge in benefits faced by unpaid carers, making a higher tax-free mileage allowance of 55p permanent, and slashing tariffs on a range of popular foods - including chocolate, beans and gherkins. They are also extending parental pay to more than 150,000 parents each year, including self-employed fathers who had previously missed out.
