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British Treasury chief Rachel Reeves will deliver her first budget in Parliament on Wednesday, a tightrope act that aims to find billions for investment through borrowing and tax hikes without roiling businesses or raising taxes on working people.
It’s the first budget by a Labour Party government in almost 15 years, and the first ever delivered by a female finance minister.
Reeves pledged that the budget will put “more pounds in people’s pockets” and get the economy growing, but the government has struck a gloomy note about the state of the public finances.
Prime Minister Keir Starmer warned that the budget will reflect “the harsh light of fiscal reality.”
The center-left Labour Party was elected July 4 after promising to banish years of turmoil and scandal under Conservative governments, get Britain’s economy growing and restore frayed public services, especially the state-funded National Health Service.
The center-left government argues that higher taxes and limited public spending increases are needed to “fix the foundations” of an economy that it argues has been undermined by 14 years of Conservative government.
The Conservatives say they left an economy that was growing, albeit modestly, with lower levels of debt and a smaller deficit than many other Group of Seven wealthy nations.
Pumping money into health, education and housing is a priority of the new government, made harder by a sluggish economy, hobbled by rising public debt and low growth. The government also says there is a 22 billion pound ($29 billion) “black hole” in the public finances left by the Conservative government.
That means the budget is certain to include tax increases — though Labour has pledged not to raise the tax burden on “working people,” a term whose definition has been hotly debated in the media for weeks. The Treasury has announced that about 3 million of the lowest-paid workers will get a 6.7% pay increase next year, with he minimum wage rising to 12.21 pounds ($15.90) an hour.
Reeves – Britain’s first female chancellor of the exchequer — is widely expected to tweak the government’s debt rules so that she can borrow billions more for investment in the health system, schools, railways and other big infrastructure projects, and to raise money by hiking tax paid by employers, though not employees.
