Rachel Reeves’s spring statement has sparked intense debate, with key questions emerging on welfare cuts, taxation, and the government’s broader economic strategy.
As speculation grows over potential tax hikes in the autumn Budget, Independent readers have raised concerns about the impact on carers, low-income households, and investment in critical sectors such as technology and housing.
I took questions from readers in a live Q&A on 27 March, offering insights into Labour’s fiscal policies, the potential for a wealth tax, and the broader implications of recent policy decisions.
With the economy facing headwinds — including the threat of US trade tariffs under Donald Trump and public dissatisfaction over welfare reforms — Reeves’s cautious approach has left her little fiscal room for maneuver.
Meanwhile, opposition voices and Labour backbenchers continue to press for alternative solutions, including targeted taxation on the wealthy.
Here are a selection of spring statement questions from Independent readers – and my answers from the “Ask Me Anything” event.
Q: Why were there no investments in the tech industry?
NotRedorBlue
A: I agree it could have been mentioned. Rachel Reeves would say her spring statement was not a Budget, and remind us she boosted capital investment by £100bn in her Budget last October, including on research and development. We’ll probably hear more about the tech sector when the government publishes its long-awaited industrial strategy (soon-ish!) and in the government-wide spending review issued in June.
Q: Is there any mention of the impact on carers who will lose Carers Allowance?
JJAMMontoast
A: It’s not something ministers seem keen to talk about. But Labour MPs worried about the £5bn cuts to benefits are aware of the threat to carer’s allowance and I’m sure it will receive more attention in the run-up to the Commons vote on the changes expected in June. Ed Davey, the Liberal Democrat leader, who has made social care and carers key campaign issues and who has a disabled son, has raised the question. Unpaid carers deserve more recognition and support. They contribute an estimated £445m each day to the economy in England and Wales – £162bn a year.
Q: Please explain, in terms that a young person of average intelligence might understand, what is the point of elections, parties, parliament, PMQ’s, etc?
envious
A: I think it was Winston Churchill, quoting an academic, who said democracy is the worst form of government except for all the other forms that have been tried. I think our system, for all its faults, is worth defending — and improving. Democracy is under threat around the world in an era of so-called strongman leaders – whether in Russia, China, the US or Turkey for example. Some people would argue it is also at risk because of the rise of populists. I don’t think the UK is immune to that, as we can see with the rise of Nigel Farage’s Reform UK in the opinion polls.
Q: Why won’t Labour help instigate a global wealth tax?
GreenModerate
A: I think support for a wealth tax is rising among Labour MPs, though I suspect it’s still a minority view among them. The issue will be on the agenda as there will now be a big debate about whether Rachel Reeves should raise taxes in her Budget in October this year. She may be forced to, as she doesn’t want to change her fiscal rules (to allow her to increase borrowing) and the scope for further spending cuts will be limited by the controversy over welfare savings.
There’s a case for raising taxes to fund the higher defence spending the UK will need in the new world. One idea is to equalise capital gains tax (CGT) with income tax so they are charged at the same level. The chancellor did raise CGT in last October’s Budget so she could go further. Equalisation seems sensible to me, though critics would argue it would hit entrepreneurs and thus economic growth. Some people would call it a wealth tax.
A purer version would be a 1 per cent or 2 per cent levy on a certain level of assets, either annually or as a one-off. A 2 per cent charge on people with assets of more than £10m could raise £24bn. But I doubt the government will go down this route. Critics are sceptical that it would work and say the very rich would find ways around it. Although the figures are disputed, there is some evidence that non-doms are leaving the UK following the recent crackdown. Reeves wants to rebuild bridges with businesses burnt by her decision to raise employers’ national insurance contributions and will not want to be accused of driving wealth creators out of the country.
A global wealth tax would stop highly mobile people from moving elsewhere to avoid it. But I don’t see any chance of agreement on one – not least because Donald Trump is on the scene – or the UK pushing for one.
Q: Why does it feel that the majority of the “waste” being targeted affects those lower down the ladder?
itslikeacarcrash
A: You are right that much of the savings are coming from the least well off; disabled people are not well off. This morning I attended an event at the Resolution Foundation think tank. Its analysis found that two-thirds of the welfare cuts will fall on low-to-middle-income groups. Tax and benefit changes will reduce the incomes of the second poorest fifth of households by 1.5 per cent in this five-year parliament, and those of the richest fifth by only 0.6 per cent.
There are no plans to reduce payments for MPs or peers. Most MPs do have a base in their constituency (or nearby). Their family often lives there. Those who want a base in London (rather than staying in hotels) do have to meet the extra cost of maintaining two homes.
Q: £2bn for affordable and social housing. What is the definition of “affordable housing” and “social housing” here?
Robin Baldock
A: The government defines affordable housing as “housing for sale or rent, for those whose needs are not met by the market.” Examples include social rent (at least 20 per cent below market rates); affordable rent or intermediate housing such as shared ownership, when people buy a share of a property and rent the remaining share. Social housing is provided by local authorities or agencies, such as not-for-profit housing associations.
The £2bn you mention will fund 18,000 new affordable homes. It’s a down payment before a more long-term investment later this year.
You’re right about the problem of land banking. But there was some good news in the spring statement. The Office for Budget Responsibility fiscal watchdog, after talking to the housebuilding industry, thinks we are on track for a 40-year high in housebuilding by 2030, and that 1.3 million homes could be built in five years — not far short of the government’s 1.5 million target.
Q: Why aren’t ISA allowances being reduced?
Victor Smith
A: There was a lot of speculation before the spring statement that Rachel Reeves would cut the annual limit for tax-free cash ISAs from £20,000 to £4,000. She did not do so, partly because she did not want the statement to look like a Budget after promising to have only one fiscal event a year. The government said yesterday it wants to get the “balance right” between cash and equities in ISAs as part of a retail investing revolution. So a change could happen in the Budget this autumn.
Reeves might be tempted to look again at tax relief on pensions. It costs the Treasury £42bn a year, with £27bn of that going to people paying the 40 or 45 per cent income tax rates, with only just over a third going to basic rate taxpayers. In 2016, Reeves supported a flat rate of relief at 33 per cent. A change would not breach Labour’s manifesto promises not to raise income tax, national insurance or VAT. But the chancellor might be wary of alienating business figures.
Q: Was this tightening of the fiscal belt/new age of austerity coming whoever had won the last election?
WednesdayOwl
A: Yes. The Conservatives’ public spending plans were very sketchy, to put it politely. Knowing the election was coming, they did not put money aside for items like public sector pay rises that were always going to be in the pipeline. Hence Labour’s claims about a black hole. But all governments make choices. There were other ways for Labour to balance the books. Rachel Reeves could have avoided spending cuts by increasing taxes, but didn’t want to so soon after her £40bn tax hike in last October’s Budget. She believes there is no public appetite for tax rises when the tax burden is heading for its highest-ever level.
On defence, I suspect the UK will have to devote more than 2.5 per cent of GDP to it. The government has set a target of 3 per cent in the next parliament. Even that might not be enough in the new world ushered in by Donald Trump. The bottom line is that Europe now has to fund its own security. I doubt any future US president will turn the clock back and reverse Trump’s decision. The UK government is talking up the boost to jobs and growth from a bigger defence budget, but some experts are cautious about how big the benefits will be.
These questions and answers were part of an ‘Ask Me Anything’ hosted by Andrew Grice at 3pm GMT on Thursday 27 March. Some of the questions and answers have been edited for this article. You can read the full discussion in the comments section of the original article.
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