Chancellor Rachel Reeves insisted taxes on working people have been kept at "an absolute minimum" as she defended her £26 billion Budget against mounting criticism from economists and opposition parties.
The defiant-sounding Chancellor told Sky News on Thursday: «I do recognise that that will mean that working people pay a bit more. But I've kept that contribution to an absolute minimum by closing … a number of tax loopholes and also bearing down on Government spending, on waste and inefficiency.» When challenged on Times Radio about rising welfare costs, she rejected attempts to "write my obituary today."
The Budget announced Wednesday puts Britain on course for a record tax burden through a range of measures, including extending the freeze on income tax thresholds until 2030/31. This will drag 780,000 more people into basic-rate tax, 920,000 into higher-rate, and 4,000 into additional-rate by 2029/30 as wages rise.
The increases fund welfare spending, including the abolition of the two-child benefit cap expected to lift 450,000 children out of poverty at a cost of £3 billion annually by 2029/30. «I'm not going to apologise for lifting the two-child limit,» Reeves said.
Think tank criticism
The influential Resolution Foundation argued Reeves' decision to stick to Labour's manifesto pledge has backfired on ordinary workers. Chief executive Ruth Curtice said: «Ironically, sticking to her manifesto tax pledge has cost millions of low-to-middle earners, who would have been better off with their tax rates rising than their thresholds being frozen.»
The think tank calculated raising all tax rates by one penny would have been less costly than freezing thresholds for anyone earning below £35,000. «Indeed, all but the top 10% of the income distribution are worse off because of opting for threshold freezes over rate rises,» it said.
Curtice described the Budget as «front-footed – and front-loaded» on cost-of-living support but warned most of the pain would be felt in 2028 when threshold freezes, the mansion tax and salary sacrifice changes kick in. «This Parliament is set to be second only to the last parliament for (living) standards… This decade continues to look really, really tough,» she told BBC Radio 4's Today programme.
Additional tax measures
The Budget includes a new pay-per-mile tax for electric vehicles, increased taxes on online betting from 21% to 40%, and a so-called "mansion tax" on homes worth more than £2 million. National insurance will also be levied on pension contributions above £2,000 annually from April 2029.
Households will see energy bills cut by around £150 next year through the scrapping of the Energy Company Obligation scheme. The minimum wage will rise to £12.71 from April for workers over 21.
Budget overshadowed by leak
The Budget announcement was overshadowed by an unprecedented blunder where the Office for Budget Responsibility published full details of Reeves' plans more than 30 minutes before her Commons speech. OBR chairman Richard Hughes apologized for the «technical error» and launched an internal investigation, pledging to «abide by the recommendations» even if they suggest he should resign.
Reeves said the premature publication «did let me down» and «it must never happen again,» though she retained confidence in Hughes.
The OBR also downgraded economic growth forecasts for the next four years while raising this year's projection from 1% to 1.5%. Growth for 2026 was cut from 1.9% to 1.4%, with similar downgrades through 2029.
Note: This article was created with Artificial Intelligence (AI).
