The Chancellor of the Exchequer, Rachel Reeves, has informed ministers that she plans to implement tax rises and spending cuts amounting to £40bn in the upcoming Budget, according to sources close to the government who spoke to the BBC. Reeves revealed that the £22bn shortfall left by the previous administration would only be enough to maintain public services at their current level. Officials say that Reeves is developing a plan to acquire the extra £40bn in order to prevent any real-term reductions in budgets for government departments.
The Chancellor, who is currently making final arrangements for her first Budget, emphasised that she would avoid any return to the austerity measures of previous years. Instead, she is expected to prioritise investment in public services as a means of stimulating economic growth. Reeves aims to abide by a new borrowing rule which mandates that all day-to-day spending must be financed through taxes, rather than borrowing. This has limited the government’s options, requiring them to make cuts to welfare programs as well as raising certain taxes.
When asked to comment on rumours surrounding potential tax changes, a spokesperson for HM Treasury declined to provide details. Speaking on BBC Breakfast, Prime Minister Keir Starmer refused to rule out the possibility of a National Insurance (NI) increase for employers as part of the Budget. Officials are reportedly exploring the potential to raise revenue by extending NI charges to cover employer pension contributions.
The Chancellor’s proposed £40bn in cuts and tax rises is more significant than previously stated by government officials. The announcement is viewed by some as an effort to prepare the public for the coming tax rises and to establish expectations. Reeves has made comments about the wealthiest members of society shouldering a greater tax burden, indicating that changes will likely impact those with the highest incomes. There are hopes, however, that the majority of taxpayers, particularly those considered “working people,” could be spared from the tax increase
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