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Transport Secretary Heidi Alexander has rejected claims that leaks about the upcoming Budget have harmed the economy, despite criticism suggesting the ongoing speculation has led to uncertainty among businesses and consumers. In recent months, media coverage has extensively focused on potential tax increases, with the government reportedly considering various measures. Former Bank of England chief economist Andy Haldane described this prolonged speculation as the primary factor behind stagnating economic growth.
Alexander responded by noting that speculation before Budgets is common, emphasizing that the chancellor has consistently communicated her key priorities. Chancellor Rachel Reeves is anticipated to announce tax rises in her forthcoming Budget to address a significant funding shortfall. Although ministers hinted at plans to raise income tax rates, leaks suggested Reeves was contemplating this move despite previous Labour election promises to keep basic, higher, and additional income tax rates unchanged. However, last week government insiders indicated that Reeves had abandoned this plan due to more favorable economic forecasts.
Governments sometimes disclose Budget details deliberately to gauge public and market reactions or soften the impact of announced measures. Haldane criticized the drawn-out, “leaky” Budget process, calling it a “fiscal fandango” that has imposed real costs by creating hesitation among economic actors. He acknowledged that such “pantomime” has been a feature of budget-making for years, leading to a gradual decline in the process’s effectiveness. When questioned about the leaks’ economic effects, Alexander reiterated that speculation is inevitable and urged patience until the Budget is formally unveiled. She pointed out that the government’s fiscal planning has faced challenges, including downward revisions to productivity forecasts and a difficult global economic climate.
In response to the leaks, the Conservative Party has urged a formal inquiry, warning of tangible consequences for financial markets. Shadow Chancellor Mel Stride wrote to the Treasury’s senior civil servant, suggesting that either ministers authorized the briefings or that unauthorized leaks occurred within the department. The chancellor’s Budget is now expected to introduce several smaller-scale tax increases rather than raise income tax rates directly. Nonetheless, the government has not excluded extending the freeze on income tax thresholds, a move that effectively increases tax burdens when wages rise by pushing more earners into higher tax bands.
Alongside tax considerations, Reeves intends to focus on easing the cost-of-living crisis, with the government announcing an unprecedented freeze on rail fares in England for the coming year. Additional priorities include reducing NHS waiting times and shrinking the national debt. There is also widespread anticipation that Reeves will abolish the two-child benefit cap, which limits support for families claiming universal credit or tax credits to only two children. This policy, introduced under Conservative rule, faces pressure for removal from Labour MPs and could cost more than £3 billion. While Alexander stopped short of confirming the cap’s removal, she emphasized that combating child poverty remains central to Labour’s mission.
The Conservatives oppose scrapping the cap, with Stride arguing it promotes fairness by ensuring families on benefits make financial decisions similar to those of working households. He challenged the chancellor to demonstrate fiscal discipline, particularly in welfare spending, to avoid further tax increases that might impede economic growth. Meanwhile, Green Party leader Zack Polanski hailed the expected removal of the cap as a major victory, criticizing the Labour government for delay and calling for wealthier individuals to be taxed more heavily instead of burdening low-income workers and the unemployed
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