Chancellor Rachel Reeves has acknowledged widespread public frustration with economic inequality ahead of delivering her crucial second Budget on Wednesday.
Addressing Public Anger and Economic Challenges
In a filmed address released before the Budget announcement, the Chancellor recognised that many British people feel angry at the unfairness present in the current economic system. While pointing to some progress during the past year, including wages rising faster than inflation, falling hospital waiting lists, and stronger-than-expected economic growth, she admitted significant challenges remain.
I know that the cost of living is still bearing down on family finances, Ms Reeves stated, adding that people feel frustrated by the pace of change. She attributed part of the current difficulty to the lasting damage from austerity, what she termed a chaotic Brexit, and the pandemic, which she said were worse than initially anticipated.
Budget Measures and Fiscal Strategy
The Chancellor has firmly positioned this Budget as being for the British people, pledging it will lay foundations for a fairer, stronger, and more secure Britain. She committed to avoiding a return to austerity while simultaneously rejecting reckless borrowing, instead promising what she called the biggest drive for growth in a generation.
To maintain fiscal credibility, Ms Reeves is pursuing a strategy of increasing her fiscal headroom - the buffer above her self-imposed borrowing rules. With major spending cuts ruled out, tax rises are expected to be the primary method of addressing the shortfall in public finances.
While an earlier plan to increase the headline rate of income tax has been abandoned to honour a Labour manifesto pledge, the Chancellor is reportedly considering a dozen alternative tax measures. These potentially include:
- A freeze on income tax thresholds, which would drag more people into paying tax or into higher bands as wages rise.
- Limits on pension contributions under salary sacrifice schemes before they become subject to national insurance.
- A so-called mansion tax on properties valued over £2 million.
- A new gambling levy.
- Pay-per-mile charging for electric vehicles.
Targeted Support and Minimum Wage Increase
Addressing the cost of living crisis remains a central priority. Ms Reeves informed Labour MPs that among her key Budget measures would be scrapping the controversial two-child benefit cap, a move estimated to cost between £3 billion and £3.5 billion by the end of the Parliament.
She is also expected to continue the freeze on fuel duty, a measure reportedly costing around £3 billion. In a significant pre-Budget announcement on Tuesday, the Chancellor confirmed she would accept the Low Pay Commission's recommendations to increase the minimum wage, giving full-time workers over 21 an annual pay rise equivalent to approximately £900.
As the Budget is unveiled, farmers are planning protests in Westminster concerning inheritance tax, though the Metropolitan Police have prohibited them from bringing tractors. The Chancellor concludes that she will make the fair and necessary choices to deliver on the promise of change, aiming to balance fiscal responsibility with tangible support for households feeling the pinch.
