The leftist Labour Party government in Britain announced £26 billion in tax hikes as a part of its autumn budget, which will take the tax burden to an all time high over the next five years.
Chancellor Rachel Reeves, the Labour government’s top cabinet minister on the economy, unveiled Wednesday her long-anticipated budget, which will see millions of Britons see their taxes increased despite the leftist party’s promise to focus on growth and to protect workers from paying more in tax.
While Reeves did not technically raise income taxes — as it would have been a direct contradiction of the party’s 2024 election manifesto — her budget extends the income tax threshold freeze, resulting in what is known as fiscal drag, a process by which workers are brought into higher tax bands as a result of inflation or pay growth.
According to the Office for Budget Responsibility (OBR), which controversially leaked the details of Reeves’ plan prior to the announcement, the extension of the freeze announced on Wednesday will see an estimated 920,000 more workers paying the 40 per cent income tax rate by 2029-30 compared to projections in March. Similarly, some 780,000 more people will be forced into paying income tax for the first time at the lowest 20 per cent rate, The Times reported.
As a result, income tax will increase from 10.5 per cent of GDP to 11.8 per cent by 2030-31. In total, the overall tax burden will climb from 34.7 per cent to an all time high of 38 per cent of GDP by 2031 after the £26 billion in tax hikes are factored in.
The government attempted to ameliorate anger over the cost of living by announcing q £150 reduction in energy payments, and an increase to the national minimum wage, which critics warn may hurt employment numbers. In a further populist measure, the government will introduce a so-called “mansion tax” on properties worth over £2 million. However, some have warned that this will further exacerbate the exodus of millionaires from the country.
While raising a raft of different taxes, the government will continue on its welfare spending spree, with spending to rise by £9 billion by the end of the decade, including scrapping the two child benefit cap, which will see 560,000 families have their benefits increased at a cost of £3 billion.
Government spending on the migrant crisis is also to continue to soar, with the OBR predicting that the cost of the asylum system could hit a record £6.2 billion per year by 2028-29 if the current trends of illegal entries continue at their current pace.
On top of that the government is expected to pay out £1.8 billion over the next three years to introduce a mandatory digital ID system, which Prime Minister Sir Keir Starmer has claimed will be used to deter illegal immigration.
The tax hikes have done little to assuage concerns that the Labour economic agenda will hinder growth, with the OBR admitting that Reeves’ budget will “have no significant impact on output” by 2030 and would only see marginal gains in the short term.
While the report increased its growth predictions for this year to 1.5 per cent from 1 per cent, its economic outlook for the next four years were all downgraded, likely meaning that Labour’s election pledge of delivering the strongest growth of the G7 will go unfulfilled.
“As Chancellor I don’t get to choose my inheritance and I have to live in the world as it is, not the one I might like it to be. And I believe I made the fair and necessary choices, given the fiscal circumstances,” Reeves said, while refusing to rule out further tax hikes.
Conservative Party leader Kemi Badenoch blasted Reeves for breaching her pledge to not raise taxes again after having committed the “biggest tax raid in British history” last year.
“She promised that she wouldn’t be back for more. She swore it was a one-off. She told everyone that from now on it would be stability and she would pay for everything with growth. Today, she has broken every single one of those promises. If she had any decency, she would resign,” Badenoch said.
“At the last budget, she said she was proud to be the country’s first ever female chancellor. After this budget, she will go down as the country’s worst ever chancellor,” she quipped.
“Today she has announced a new tax rate of 26 billion… Household income is down. Spending policies in this budget increase borrowing in every year. That smorgasbord of misery we just heard from her can be summed up in one sentence. Labor are hiking taxes to pay for welfare. This is a budget for benefit street.”
Reform UK leader Nigel Farage noted that the Labour government did receive a “very bad inheritance” from the previous 14 years of Conservative-led governments, including “tax levels at post-war highs, mass uncontrolled immigration, most people coming, not actually working and being a burden and a massive cost, net zero policies de-industrialising Britain at a rapid rate, giving us the most expensive energy in the world, and debt which went up
about two and a half times during those 14 years.”
However, the Brexit boss slammed the Reeves budget for being an “assault on aspiration and an assault on saving” while subsidising benefits claimants and illegal migrants.
Reform director of policy Zia Yusuf said that the “only way to break this country out of this doom loop is to do the opposite of what the political class has been doing” by reducing spending and allowing British workers to keep more of the money they earn.
COMMENTS
Please let us know if you're having issues with commenting.