Cheaper pints, surprise wage boost & fuel duty freeze in Budget – but £40BILLION tax blitz will pay for it
RACHEL Reeves has today unleashed £40billion of tax rises on Brits – but spared hard-pressed drivers a crippling fuel duty hike.
The Chancellor used the first Labour Budget in almost 15 years to raise eye-watering sums from bosses, smokers and drinkers.
The Halloween package included a raft of treats – including a cut to pub beer prices, and hikes in the minimum wage and state pension.
But it also clobbers millions with tricky tax hikes that Ms Reeves said would fund a spending spree on services like the NHS.
At its heart was a mammoth £25billion National Insurance raid on firms by raising the headline employer rate from 13.8 to 15 per cent.
To groans from Opposition MPs, she also announced a reduction to the threshold business start paying NICs from £9,100 to £5,000.
It raised fears that workers will bear the brunt of the increase, and sparked accusations it breaches the party’s manifesto pledges.
The OBR watchdog estimated it would whack each employee with an average annual £800 tax rise.
The “trick and treat” Halloween package included:
- A freeze to fuel duty for a 15th consecutive year in a win for The Sun’s Keep It Down campaign
- A penny off a pint by cutting draught beer duty, but raising booze taxes on other drinks
- A gloomy forecast of sluggish growth in a blow to Labour’s flagship mission
- A stamp duty rise for second-home buyers of two percentage points
- A pay rise for millions as the minimum wage was increased by £1,400 a year
- A hike to a packet of cigarettes as smoking duties were raised
- A new tax on vapes ahead of the looming ban on disposable e-cigs
- Higher taxes on air passenger duty for private jets that hits the wealthy
- A benefits crackdown with Ms Reeves telling jobless Brits to “get back to work”
- An increase to the state pension of £473 next year through the triple lock
- An inheritance tax raid through freezing the rates people pay
- An increase to the Carer’s Allowance to give cash to 60,000 more carers
Hikes to capital gains, inheritance tax, a vape tax and the long-expected VAT hit to private schools were also unveiled.
But Ms Reeves ruled out extending a freeze on income tax thresholds, which had risked dragging millions more into higher rates.
Conceding her Budget would split opinion, Ms Reeves said: “This is a moment of fundamental choice for Britain.
“I have made my choices. The responsible choices. To restore stability to our country.”
Treats
Despite clobbering millions of Brits with tax hikes, Ms Reeves said she would freeze fuel duty and maintain the temporary 5p cut.
It marks a huge victory for motorists and The Sun’s Keep It Down crusade which has now successfully campaigned for pump relief for 15 consecutive years.
To cheers in the Commons, the Chancellor said: “In these difficult circumstances – while the cost of living remains high, and with a backdrop of global uncertainty – increasing fuel duty next year would be the wrong choice for working people.
“It would mean fuel duty rising by 7p per litre. So, I have today decided to freeze fuel duty next year and I will maintain the existing 5p cut for another year, too.
“There will be no higher taxes at the petrol pumps next year.”
She also had good news for beer drinkers through a cut to draught duty by 1.7 per cent – meaning “a penny off a pint in the pub”.
Tricks
But in a bitter blow to wine and spirits lovers, she announced that taxes on non-draught tipples will increase with inflation.
Campaigners called it a “kick in the teeth to distillers, landlords and working people who will feel this in their pockets.”
By far the largest revenue-raiser was a massive raid on employers through National Insurance increases.
For weeks Labour has insisted this would not break a flagship election pledge not to raise the rates of income tax, National Insurance and VAT on working people.
A few nuggets to give Brits hope, but make no mistake it's a long road before things get better
By Ryan Sabey, Deputy Political Editor
RACHEL Reeves has used her first Budget to embark on a massive £40 billion tax raid – with only small relief for hard-working Brits.
The Chancellor told the country that there would be short-term pain before any gain at the start of a ten-year plan for Britain.
Treasury sources has been saying there would be no rabbits out of the hat – but there was one for workers.
But there will be a wait.
Income tax thresholds will go up with inflation from 2029 leaving more money in the pockets of people going out to work.
There will be major relief to motorists too who will see fuel duty frozen for yet another year – thanks to The Sun’s Keep It Down campaign
Yes, change won’t happen overnight if anyone was expecting to actually feel better off soon.
And with growth forecast to be less than 2 per cent for the next few years there could be more tax raids and savings on the way.
This Labour government had put growth at the very heart of its plans for office.
But the biggest hit will come to business. Some £25 billion a year by the end of the decade will come from a rise to employer national insurance contributions.
But to help small business there will be exemptions for those firms who employ four or fewer workers.
Despite some concern in the hospitality industry, there will be in part relief as she confirmed “a penny off a pint in the pub”. Some will say that is small beer.
There was a pledge to make waiting lists in hospitals to be no longer than 18 weeks as she ploughed £22 billion into the NHS for day-to-day spending.
She stood in the Commons – as the first female Chancellor to deliver a Budget – telling the country to face the reality in her attempts to rebuild Britain.
She was quick to aim fire at the Tories saying they “failed our country” by breaking the NHS and hurting business with the Brexit deal.
But the Tories will attempt to make hay from Labour putting up taxes.
A tweet from Rishi Sunak was gaining traction in the build-up to the Budget.
Just days before the election, he wrote: “Keir Starmer will put up your taxes. Bookmark this tweet.”
Some departments including Justice and Transport are understood to have been hit hard.
We will only find out the true cost to them in the coming weeks and months.
But some of the cash will be found in 2 per cent efficiency savings across government with greater use of technology and joined-up thinking.
Massive savings of £4.3 billion in counter-fraud measures in welfare will also boost treasury coffers.
If anyone was expecting a rabbit out of the hat to soothe the tax-raising pain, they were probably left disappointed.
Treasury sources have been saying that the era of rabbits out the hat “is over”.
Her ambition is growth to make everyone feel richer but it’s going to be a long road.
Ms Reeves insisted to MPs: “Working people will not see higher taxes in their payslips as a result of the choices I make today. That is a promise made – and a promise fulfilled.”
But announcing the NICs sting on bosses, she said: “I know that this is a difficult choice. I do not take this decision lightly.”
Economists have warned raising taxes on firms would be a “straight-up” breach of Labour’s manifesto, and likely be absorbed by workers through lower wage increases.
Defiant Ms Reeves said: “We are asking business to contribute more and I know that there will be impacts of this measure felt beyond businesses, too as the OBR have set out today.
“But in the circumstances that I have inherited, it is the right choice to make. Successful businesses depend on successful schools.
“Healthy businesses depend on a healthy NHS. And a strong economy depends on strong public finances.
“If the party opposite chooses to oppose this choice, then they are choosing more austerity, more chaos and more instability. That is the choice our country faces too.”
Former PM Rishi Sunak said Sir Keir Starmer and the Chancellor “have not been straight with the British people”.
In his swansong before bowing out as Tory leader, he fumed: “Time and again, we Conservatives warned Labour would tax, borrow and spend far beyond what they were telling the country.
“And time and again, they denied they had such plans, but today, the truth has come out.”
Top boffin Paul Johnson added: “Probably three quarters or so of the increase will flow through to lower pay.”
Ms Reeves insisted she had a mandate for her Budget raids – saying the “country voted for change” on July 4.
She told MPs in the Commons: “My belief in Britain burns brighter than ever. And the prize on offer is immense.
“More pounds in people’s pockets. An NHS that is there when you need it. An economy that is growing, creating wealth and opportunity for all, because that is the only way to improve living standards.
“And the only way to drive economic growth is to invest, invest, invest. There are no shortcuts.
“And to deliver that investment, we must restore economic stability, and turn the page on the last 14 years.”
Ms Reeves – the nation’s first ever female Chancellor – accused the Tories of blowing a £22billion hole in the public finances to justify her eye-watering tax hikes.
She said her predecessor Jeremy Hunt deliberately “covered up” the dire state of the nation’s coffers from the OBR watchdog.
Confirming a £40billion tax whack, Ms Reeves said: “Any Chancellor standing here today would face this reality. And any responsible Chancellor would take action.
“That is why today, I am restoring stability to our public finances and rebuilding our public services.”
The economic outlook shows inflation will settle at just above the 2 per cent target until the end of the decade.
Growth is forecast to remain sluggish – averaging just above 1 per cent each year until 2029 in a blow to Labour’s flagship mission to swell the economy.
Some £11.8billion will be set aside to compensate victims of the infected blood scandal, and £1.8bn for the Post Office scandal.