Chancellor pledges 'fair choices' in crucial Budget
Chancellor Rachel Reeves has promised to make 'fair and necessary choices' in her second Budget scheduled for Wednesday, despite widespread expectations of significant tax increases. The announcement comes as the government attempts to address the ongoing cost-of-living crisis while maintaining support from backbench Labour MPs.
Tax rises expected despite improved outlook
While earlier proposals to increase the headline rate of income tax have been abandoned following improved economic projections, the Chancellor remains committed to expanding her fiscal headroom. With significant spending reductions ruled out, tax hikes are expected to be the primary mechanism for addressing the shortfall in public finances.
Among the measures reportedly under consideration are a freeze on income tax thresholds, which could push more people into higher tax brackets as wages rise. The Chancellor is also said to be contemplating restrictions on pension contributions through salary sacrifice schemes before they become liable for national insurance.
Multiple tax measures under consideration
The so-called 'smorgasbord' strategy for raising taxes includes up to a dozen potential measures. These reportedly include a proposed 'mansion tax' on properties valued over £2 million, a new gambling levy, and pay-per-mile charges for electric vehicles.
Despite the focus on revenue-raising measures, Ms Reeves has explicitly ruled out a return to austerity and rejected what she termed 'reckless borrowing'. She emphasised her commitment to 'the biggest drive for growth in a generation' while maintaining fiscal credibility.
Support measures balance tax increases
In line with her priority of reducing living costs, the Chancellor is expected to abolish the two-child benefit cap, a move projected to cost between £3 billion and £3.5 billion by the end of Parliament. Several newspapers have also reported that she is considering maintaining the fuel duty freeze, which would cost an additional £3 billion according to The Times.
On Tuesday, Ms Reeves announced her acceptance of the latest recommendations from the Low Pay Commission to increase the minimum wage, providing what amounts to a £900 annual pay rise for full-time workers aged 21 and over.
Meanwhile, farmers are planning to protest in Westminster on Budget day over inheritance tax, though the Metropolitan Police have prohibited them from bringing their tractors to the demonstration.
