Rachel Reeves has recognised the public’s « anger at unfairness » in the UK economy, ahead of her second Budget announcement on Wednesday – but said the economic situation was ‘worse than we thought’.
In a pre-recorded address before the Budget, the Chancellor stated that the Government had begun to see positive results over the past year, with « wages rising faster than inflation, hospital waiting lists coming down, and our economy growing faster and stronger than people expected ».
« But I know there is more to do, » she admitted. « I know that the cost of living is still bearing down on family finances, I know that people feel frustrated at the pace of change, or angry at the unfairness in our economy.
« I have to be honest that the damage done from austerity, a chaotic Brexit and the pandemic were worse than we thought.
« But I’m not going to duck those challenges, and nor will I accept that our past must define our future. It doesn’t have to. »
She characterised the Budget as being for « the British people » and pledged that the Government would collaborate with them to « build a fairer, stronger and more secure Britain ».
The Chancellor asserted that she will utilise her Budget to introduce measures to combat the cost-of-living crisis, as the embattled Government aims to retain the support of backbench Labour MPs amidst an anticipated series of tax hikes.
Ms Reeves has also promised to lower the costs of Government debt and is likely to take steps to increase the buffer above her borrowing plans, as she strives to uphold fiscal credibility.
« Today I will take the fair and necessary choices to deliver on our promise of change, » Ms Reeves said ahead of the Budget.
She added: « I will not return Britain back to austerity, nor will I lose control of public spending with reckless borrowing.
« And I will push ahead with the biggest drive for growth in a generation. »
The Chancellor is reportedly set to embrace what is being dubbed a « smorgasbord » strategy for raising taxes at the Budget.
Earlier this month, she abandoned proposals to increase the headline rate of income tax, something which would have violated a Labour manifesto commitment, following improved economic forecasting.
Nevertheless, the Chancellor still plans to pursue a policy of expanding her fiscal headroom, a cushion on her self-imposed borrowing regulations.
She has dismissed significant spending reductions to accomplish this, meaning tax increases are expected to be the primary mechanism for plugging the so-called black hole in the public finances.
Whilst income tax rates are no longer expected to rise, a freeze on income tax thresholds is apparently under consideration.
This would result in more individuals being pulled into paying tax for the first time or moved into a higher bracket as salaries grow.
Ms Reeves is also reportedly weighing up restrictions on how much workers can put into their pensions through salary sacrifice arrangements before it becomes liable to national insurance. Among the dozen tax hikes reportedly under consideration are a proposed « mansion tax » on properties valued over £2 million, a gambling levy, and pay-per-mile charges for electric vehicles.
Just this Monday, Ms Reeves informed Labour MPs that one of her main priorities for the Budget was reducing the cost of living.
In line with this, she is anticipated to abolish the two-child benefit cap, a move projected to cost between £3 billion and £3.5 billion by the end of Parliament.
Several newspapers have also reported that Ms Reeves is contemplating maintaining the freeze in fuel duty, which is expected to cost an additional £3 billion, as per The Times.
On Tuesday, she declared that she would accept the latest recommendations from the Low Pay Commission to increase the minimum wage, equating to a £900 annual pay rise for those aged 21 and above in full-time employment.
Farmers are planning to protest about inheritance tax on Budget day in Westminster, but the Metropolitan Police have prohibited them from bringing their tractors.
