Rachel Reeves is targeting a £40 billion combination of tax hikes and spending cuts in the upcoming Budget. According to Treasury sources, this significant sum is essential to avoid a return to the austerity measures seen under the previous Conservative government.
Filling the Financial Gap
The chancellor aims to fill the Treasury’s coffers and address the financial “black hole” left by the former government, which Labour estimates to be around £22 billion. Reeves informed the cabinet that this amount is required just to keep public services running at their current level.
But that’s not all. According to the Financial Times, Reeves will need to find an additional £18 billion to fully balance the books. This total will be revealed when she presents the Budget in two weeks.
Difficult Decisions Ahead
Speaking to the cabinet, Reeves highlighted the challenging decisions ahead. She said the economic situation she inherited means tough choices are inevitable on spending, welfare, and taxes.
A Labour spokesperson echoed her message, explaining that Reeves cannot fix “14 years of decline in just one year or one Budget.” However, the spokesperson added that the Budget will reflect the government’s focus on protecting working people, fixing the NHS, and rebuilding Britain.
Criticism over National Insurance Hike
Reeves is facing criticism for her plan to raise £17 billion by increasing employers’ National Insurance rates. Some argue this would break Labour’s pledge not to raise NI, income tax, or VAT.
Despite the challenges, there was some positive news today. Inflation fell to a lower-than-expected 1.7%, providing a slight boost to the chancellor’s efforts.
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