Rachel Reeves unveils historic £40bn tax rises in first Budget

Chancellor Rachel Reeves has introduced a large £40bn package deal of tax will increase to fund the NHS and public providers in Labour’s first Budget for 14 years.

But she insisted “working people” wouldn’t see a rise in earnings tax, National Insurance or VAT, fulfilling a promise made by Labour on the basic election.

Employers will take the largest hit – with a rise in National Insurance contributions on their employees’ earnings which is able to elevate as much as £25bn a 12 months for the federal government.

Conservative chief Rishi Sunak accused Reeves of breaking her guarantees to employees and “hobbling” financial development.

“They’re taxing your job, they’re taxing your business, they’re taxing your savings. You name it, they’ll tax it,” Sunak told MPs in his final Commons appearance as leader of the opposition.

But Reeves claimed any “responsible chancellor” would have been compelled to do the identical to “fix the foundations” of the economic system.

In a marathon 76 minute speech, she said Labour would fulfil its promise to voters in July’s election to “invest, invest, invest” to “drive financial development”.

Labour had said that their number one “mission” was growth – and that they would achieve the highest rate of growth of any G7 country within five years.

However, the Office for Budget Responsibility’s assessment was that the package of economic measures ultimately “depart GDP largely unchanged in 5 years”.

Labour’s first Budget since 2010 sees the second biggest increase in taxes in UK history.

As measured by amount of tax raised relative to the size of the economy, it is slightly smaller than Conservative Chancellor Norman Lamont’s 1993 Budget.

But in a surprise move, Reeves decided not to continue a freeze on income tax thresholds beyond 2028, which would have dragged millions of people into the tax system for the first time or pushed them into paying higher rates.

And she announced changes to Labour’s self-imposed borrowing rules to allow the government to pump billions into the UK’s infrastructure and fund improvements to crumbling schools and hospitals.

She also froze petrol duty for next year – and retained a 5p cut introduced by the Tories that was due to expire in April.

But she said a £22bn “black hole” inherited from the previous government meant tax rises were needed.

These included:

• Capital gains tax paid on profits from selling shares to increase from up to 20% to up to 24%
• Freeze on inheritance tax thresholds extended beyond 2028 to 2030
• VAT on private school fees from January 2025
• Air Passenger Duty on flights by private jet to go up by 50%
• New tax of £2.20 per 10ml of vaping liquid introduced from October 2026
• Tax on tobacco to increase by 2% above inflation, and 10% above inflation for hand-rolling tobacco
• Tax on non-draught alcoholic drinks to increase by the higher RPI measure of inflation, but tax on draught drinks cut by 1.7%
• The stamp duty land tax surcharge for second homes will increase by two percentage points to 5% from Thursday

In what was the first Budget speech by a female chancellor in the UK’s history, Reeves told MPs: “This is a second of basic selection for Britain.

“I have made my choices. The responsible choices. To restore stability to our country. To protect working people.

“More lecturers in our colleges. More appointments in our NHS. More houses being constructed.

“Fixing the foundations of our economy. Investing in our future. Delivering change. Rebuilding Britain.”

The OBR’s forecast urged gross home product development might be increased in 2024 than anticipated in March – upgrading it from 0.8% to 1.1% and from 1.9% to 2.0% in 2025.

But there are downgrades in subsequent years – down from an anticipated 2% in 2026 to 1.8%, from 1.8% in 2027 to 1.5% and from 1.7% in 2028 to 1.5%.

Borrowing is predicted to achieve £127bn this 12 months.

The Liberal Democrats welcomed the additional cash for the NHS “to start repairing all the damage done to local health services by the Conservatives”.

But chief Sir Ed Davey mentioned: “Raising employer’s National Insurance is a tax on jobs and high streets, and it will make the health and care crisis worse by hitting thousands of small care providers.”

Scotland will obtain a further £3.4bn in Treasury funding because of the Budget.

First Minister John Swinney has been calling for the UK authorities to “immediately and significantly” improve funding for Scotland.

The SNP authorities has already minimize £500m from its funds this 12 months, with ministers warning that with out additional money they would want to make troublesome selections after they set out their tax and spending plans for subsequent 12 months in December.