Hard-up Brits are warned to brace for 'the biggest heist in modern political history': Rachel Reeves to unveil £35BN tax grab as Labour's first budget in a generation targets NI, fuel duty, school fees and even bus fares

By: dailymail Posted On: October 30, 2024 View: 113

By Jason Groves Political Editor For The Daily Mail

Published: 18:30 EDT, 29 October 2024 | Updated: 04:00 EDT, 30 October 2024

Rachel Reeves will unveil a £35 billion tax bomb today, in what critics dubbed ‘the biggest heist in modern political history.’

In one of the most consequential Budgets for years, the Chancellor will set Britain on a course of high tax, high spending and high borrowing in a gamble designed to kickstart growth.

In remarks released last night, Ms Reeves said: ‘The only way to drive economic growth is to invest, invest, invest.

‘There are no shortcuts. To deliver that investment we must restore economic stability.’

Ms Reeves, who will become the first woman in history to deliver a Budget, will confirm a loosening of the government’s fiscal rules which will enable her to borrow up to £50 billion to spend on infrastructure projects and growth sectors like green energy.

Rachel Reeves is set to put Britain on a course to high tax, high spending and high borrowing in tomorrow's Budget

Ms Reeves preparing for Wednesday's Autumn Budget in her office at HM Treasury

The Chancellor is preparing to focus tax hikes on employers, including a £20 billion hit to National Insurance contributions (file photo)

But ministers will be watching nervously for reaction in the City, where the government’s borrowing rate yesterday rose to the highest level since the election, leading to fears of mortgage rate rises.

The Chancellor is also braced for a backlash from business over her decision to focus tax hikes on employers, including a £20 billion hit to National Insurance, which critics have warned will cost jobs and depress wages.

The CBI warned that the tax hike, coupled with a bumper increase in the minimum wage, would ‘make it increasingly difficult for firms to find the headroom to invest in the tech and innovation needed to boost productivity and deliver sustainable increases in wages’.

Investors are also set to be hit by an increase in capital gains tax. And, despite Labour’s pledge to protect ‘working people’, most ordinary workers will also be hit by a decision to extend the six-year freeze in tax thresholds for at least another year.

Tory leadership contender Robert Jenrick said: ‘This Budget completes the biggest heist in modern political history. The Labour Party won power by lying to the British public about their plan to hike taxes.

‘Working people are going to suffer and our economic recovery will take a huge hit. No wonder the public don’t trust politicians.’

Rishi Sunak, who will respond to the Budget on Wednesday in one of his last acts as Tory leader, said the expected rise in NI would be a clear breach of Labour’s manifesto, which pledged not to increase income tax, national Insurance or VAT.

Conservative leadership contender Robert Jenrick said Labour's first Budget 'completes the biggest heist in modern political history'

Rishi Sunak will respond to the Budget on Wednesday in one of his last acts as Tory leader

Jeremy Hunt launched a last-ditch attempt to block a 'highly political' dossier on his time as Chancellor alongside the Budget

Minimum wage hike will mean ‘fewer jobs overall’

Chancellor Rachel Reeves will press ahead with an inflation-busting rise in the minimum wage today, despite warnings it will cost jobs.

She has signed off a 6.7 per cent hike in the National Living Wage, taking it to £12.21 per hour – almost four times the current inflation of 1.7 per cent. Ms Reeves has also agreed a record 16.3 per cent in the rate for those aged 18 to 20, taking it to £10 an hour.

She last night described the move as a ‘significant step’ towards Labour’s manifesto promise to introduce a ‘genuine living wage for working people’.

But she was warned that the bumper rise, coming on top of an expected Budget hike in employers’ national insurance, could cost jobs.

Baroness Stroud, chairman of the Low Pay Commission, which advises ministers on the minimum wage, said there were growing signs firms were struggling to cope with a series of rapid rises: ‘The Government have been clear about their ambitions for the national minimum wage and its importance in supporting workers’ living standards. At the same time, employers have had to deal with the adult rate rising over 20 per cent in two years.’

Robert Colvile, of the Centre for Policy Studies think-tank, said: ‘Given the state of the employment market there is a real risk that this will result in fewer jobs overall.’

The former PM pointed out that the Chancellor had previously condemned the idea of raising employers’ NI as a ‘jobs tax’.

He said: ‘Rachel Reeves promised that her plans were fully funded, and she promised that she wouldn’t change the debt target because that would be “fiddling the figures”.

‘We already know that those promises are totally worthless because she is going to change her fiscal rules so she can go on a borrowing spree.

‘If she was to compound that by breaking her promise to the British people not to raise taxes on working people by increasing National Insurance, that would be a complete betrayal.’

Yesterday, Ms Reeves appeared to downgrade her election pledge to protect ‘working people’ from higher taxes, saying only that she was ‘committed to ensuring that no working people will see higher taxes in their payslips after the Budget’.

Today she will try to lay the blame for the Budget pain at the Tories’ door.

She will accuse Jeremy Hunt of leaving behind a £22 billion ‘black hole’ in the public finances.

And she will say that spending plans left behind by the last government amounted to a ‘fiscal fiction’ which would have led to a return to austerity.

Instead, she is expected to pour more cash into the NHS and other public services.

Last night she said the Budget could put Britain on the path to the ‘immense’ prize of higher growth and better public services.

She said the measures would ‘turn the page on low growth and will be the start of a new chapter towards making Britain better off. It will mean more pounds in people’s pockets, an NHS that is there when they need it, and businesses creating wealth and opportunity for all’.

But briefing the Cabinet on the outline of her Budget plans yesterday, she acknowledged she had had to make ‘tough choices’ on taxes, spending and welfare.

During her autumn Budget speech on Wednesday, the Chancellor will underline the £22 billion 'black hole' in the public finances

Some of the expected announcements in the Budget:

Employers’ National Insurance to rise by up to 2p. The threshold at which NI is paid will also be cut as part of a package raising around £20 billion.

Income tax. The six-year freeze in thresholds, which is due to end in 2028 will be extended for another year, dragging hundreds of thousands of people into higher tax bands.

Private schools. From January, government will remove VAT exemption and end business rates relief for private schools.

Bus fares. The £2 fare cap on a single journey will be raised to £3, with the scheme extended until the end of 2025.

Minimum wage. National living wage to jump 6.7 per cent to £12.21 per hour, with 16.3 per cent rise for under-21s, who will get £10 per hour.

Fiscal rules. Ms Reeves will change the Treasury’s definition of debt to allow the government to borrow up to £50 billion extra for investment in infrastructure, although she is expected to spend only half that today to limit the risk of a market backlash.

Stamp duty. Ms Reeves will end a temporary cut, meaning that the tax-free threshold will be halved from £250,000 to £125,000.

Fuel duty. The industry expects Ms Reeves to end the temporary 5p-a-litre cut in fuel duty introduced after Russia’s invasion of Ukraine. But she is thought to be backing away from a bigger hike and could even freeze it for the remainder of the parliament.

Inheritance tax. The Chancellor will tighten reliefs for agricultural land and could extend the time someone has to stay alive after passing on money as a gift tax-free from seven years to 10.

Capital gains. The rate paid on the sale of assets like shares will be increased, but Ms Reeves is expected to spare second home owners a further rise.

NHS. Billions of pounds of funding, including £1.5 billion for new surgical hubs and scanners to cut waiting lists.

Energy. The Chancellor will increase the windfall tax on the big energy firms, despite warnings that a fall in the oil price means it will yield nothing.

Education. Ms Reeves will confirm £1.4 billion to rebuild crumbling schools, along with cash to fund new breakfast clubs.

Housing. Discounts for people looking to buy their own council home will be slashed by up to two-thirds as part of a plan to boost the stock of social housing.