Major details from the Budget have been disclosed ahead of Rachel Reeves delivering her financial statement to the Commons. The Chancellor, observed checking a mobile device during Prime Minister’s Questions, was set to reveal the Budget to MPs at 12:30 pm. However, the Office for Budget Responsibility (OBR) preempted this by releasing its economic and fiscal report, outlining key Budget measures, before Ms. Reeves’s address.
The OBR report confirms that the Budget will implement tax increases amounting to up to £26 billion in 2029-30. This will involve maintaining personal tax thresholds at current levels for an additional three years until 2030-31, alongside various smaller tax adjustments, resulting in tax revenues reaching a record high of 38% of GDP in 2030-31.
Furthermore, the document reveals the elimination of the two-child benefit cap starting from next April. The report states, “The Government will remove the two-child limit within UC from April 2026… The removal incurs costs of £2.3 billion in 2026-27 and £3 billion in 2029-30.”
In its forecast, the OBR raised the projected economic growth for this year from 1% to 1.5%, but revised downward its growth estimates for the following four years.
Ms. Reeves had previously cautioned that extending the freeze on income thresholds would negatively impact workers. During last year’s Budget, she informed MPs, “Extending the threshold freeze would harm working individuals, reducing their take-home pay.”
Although Labour pledged in its manifesto not to increase taxes on working people, a freeze in income tax thresholds could potentially push individuals into higher tax brackets.
During Prime Minister’s Questions, Tory leader Kemi Badenoch labeled the OBR leak as “unprecedented.” Additionally, Lib Dem leader Sir Ed Davey queried the PM about the tax hikes outlined in the OBR report.
In PMQs, Keir Starmer indicated that the Budget would embody “Labour values” and cater to families concerned about the rising cost of living. At the onset of PMQs, he stressed, “Today’s Budget will reflect Labour values and will address the priorities of the British people.”
He added, “I understand the anxieties of families struggling to pay bills. That’s why this Budget is targeted at families grappling with the escalating cost of living.”
Moreover, Starmer emphasized initiatives such as free breakfast clubs, childcare, and school meals, underscoring the commitment to reducing NHS waiting lists, national debt, and the cost of living.
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