Chancellor Rachel Reeves announced a massive £40bn tax increase to fund the NHS and public services in Labour’s first budget in 14 years.
But she insisted “working people” would not see an increase in income tax, national insurance or VAT, fulfilling a promise made by Labor at the general election.
Employers will be hit the hardest – with an increase in National Insurance contributions on workers’ earnings, which will raise up to £25bn a year for the government.
Conservative leader Rishi Sunak accused Reeves of breaking promises to workers and “holding back” economic growth.
“They tax your work, they tax your business, they tax your savings. You name it, they tax it,” Sunak told MPs in his final appearance in the House of Commons as leader of the opposition. they said.
But Reeves claimed that any “responsible chancellor” would be forced to do the same to “fix the foundations of the economy”.
In a 76-minute marathon speech, she said Labor would deliver on its promise to voters at July’s election to “invest, invest, invest” to “drive economic growth”.
Labor has said its first “mission” is growth – and they will achieve the highest growth rate of any G7 country within five years.
However, the Office for Budget Responsibility assessed that the package of economic measures ultimately “kept GDP broadly unchanged over five years”.
Labour’s first Budget since 2010 saw the second largest tax increase in UK history.
Measured as total tax revenue relative to the size of the economy, it is slightly lower than Conservative chancellor Norman Lamont’s 1993 budget.
But in a surprising move, Levi’s decided not to continue freezing the income tax threshold after 2028, which would have dragged millions of people into the tax system for the first time or forced them to pay higher rates.
She also announced changes to Labour’s self-imposed borrowing rules, allowing the government to pump billions into UK infrastructure and fund improvements to crumbling schools and hospitals.
She also froze petrol duty next year and kept in place the 5p cut proposed by the Conservatives that was due to expire in April.
But she said the “black hole” of £22bn inherited from the previous government meant tax rises were needed.
In her budget speech as Britain’s first female chancellor of the exchequer, Levis told MPs: “This is a moment when Britain faces a fundamental choice.
“I have made my choice. A responsible choice. To restore stability to our country. To protect working people.
“We have more teachers in our schools. We have more appointments on the NHS. More homes are being built.
“Repair the foundations of our economy. Invest in our future. Deliver change. Rebuild Britain.”
The OBR’s forecast shows that gross domestic product (GDP) growth in 2024 will be higher than expected in March, raising the growth rate in 2025 to 1.1% from 0.8% and to 2.0% from 1.9%.
But the ratings were downgraded in subsequent years – from an expected 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 expected to reach £127bn this year.
The Lib Dems welcomed additional funding for the NHS “to start repairing all the damage the Tories have done to local health services”.
But leader Sir Ed Davey said: “Raising employers’ National Insurance is a tax on jobs and the high street that will hit thousands of small care providers, making the health and care crisis worse.
Scotland will receive The Treasury provides an additional £3.4 billion in funding As a result of the budget.
First Minister John Swinney has been calling on the UK government to increase funding for Scotland “immediately and significantly”.
The SNP government has already slashed £500m from its budget this year, with ministers warning that without extra cash they will need to make tough choices in December when they set out their tax and spending plans for next year.
