Chancellor Rachel Reeves is set to deliver her second Budget next week, with the mood music surrounding the announcement setting the stage for further tax rises.
However, talk of a potential reversal of Labour’s manifesto commitment not to raise income tax, National Insurance on VAT on working people has been dismissed – leaving political pundits and MPs guessing how the Chancellor will fill the latest black hole in the nation’s finances.
With growth sluggish and the government shaken by anonymous briefings, the Budget could be a do-or-die moment for the Prime Minister and his administration.
LabourList spoke to MPs, think tanks and some of the nation’s trade unions to ask what they want to see from Reeves’ big announcement next Wednesday.
‘Progressive and pro-growth’
Chris Curtis, co-chair of the Labour Growth Group, acknowledged that the Budget will be “difficult” and will include tax rises of some variety. However, he urged the Chancellor to steer away from measures that could have a knock-on effect to economic growth or risk further difficult choices later down the road.
He told LabourList: “I think in a difficult budget which is ultimately going to lead to tax rises, we avoid policies that are going to hit economic growth, as that will only lead to more tough decisions in the future.”
On the left of the party, Poole MP Neil Duncan-Jordan said that next week’s Budget needs to be a “Budget for living standards” and proposed a selection of measures, including scrapping the two child benefit cap and equalising the rate of capital gains tax with income tax.
“The Budget needs to introduce a fair taxation system, so that those with the broadest shoulders carry the heaviest burden – and there are some practical steps that we could take to bring that about.
“Capital gains tax should be set at the same rate as income tax, so that unearned wealth is taxed the same way as earned income. The 45% top rate of tax should go back to 50%. That would affect just around about a million of the wealthiest people in the country.
“We should end paying interest on bank loans, we should have a windfall tax on the utilities, banks and other large companies, who’ve done extremely well – and we should have a wealth tax on those with assets over £10 million.”
Noah Law, MP for St Austell and Newquay, said that the Budget had to be “progressive… beyond a shadow of a doubt”, alongside measures that would boost growth in the economy.
Law welcomed the decision to reverse plans to break the party’s manifesto on tax and said that the Chancellor had a range of alternative options to raise funds to plug the black hole in the country’s finances.
However, he urged the government to steer away from a wealth tax – warning such a measure may not raise as much as some have claimed.
Budget ‘make-or-break for Labour’
The new soft-left grouping Mainstream described next week’s Budget as “make-or-break for Labour and for the country” and said the Chancellor must deliver urgent action to improve living standards and “lay the foundations for a new economic settlement… where people and planet come before profit”.
Luke Hurst, Mainstream’s national coordinator, said: “This Budget must prove Labour is on your side. That means urgent funds for families fighting to make ends meet, and scrapping the cruel two-child benefit cap now. It means making the super-wealthy pay their fair share. It means taking back our water and energy from greedy profiteers.
“We must recognise that prosperity won’t be generated from Whitehall and that power must cascade deeply and widely across the country. We need political reform and meaningful decentralisation to grow the economy.”
Left-wing group Momentum warned that hiking taxes on working people would “not only be morally wrong, but politically disastrous”.
The organisation’s co-chair Sasha Das Gupta said: “We welcome reports that the Chancellor has decided not to raise income tax, but her pro-austerity fiscal framework forces the Government into a corner.
“Instead, the Chancellor must use the upcoming Budget to announce an end to these arbitrary fiscal rules and focus on rebuilding Britain by taxing the rich, scrapping the two child cap, investing heavily in our public services and genuinely reversing austerity.”
‘Raise revenue without breaking manifesto or killing growth’
The Fabian Society has called on the Chancellor to freeze tax thresholds in order to raise tax revenue, warning of the need to raise tax revenue without breaking Labour’s manifesto commitments on tax.
Joe Dromey said: “The Chancellor will need to raise revenue in the budget in order to protect public services. But we need to do so without breaking the manifesto or killing off growth.
“We should extend the freeze on income tax thresholds for two years. Fabian Society analysis found this would raise over £11bn, with half of the funding coming from the richest fifth of households.”
Dromey also said Reeves should introduce a real living wage for care workers and said: “Care workers deliver some of the most important work in society. But they are chronically underpaid and undervalued, with almost half earning below the real Living Wage.
“Labour had committed to introducing a Fair Pay Agreement for social care, and allocated £500m to improve pay and conditions. The Chancellor should boost the funding available for this to £800m. This would be enough to ensure all care workers are paid at least the real Living Wage, and that they have access to occupational sick pay.
“This could be paid for by raising the insurance premium tax on private health insurance from 12% to 20%, bringing it into line with VAT.”
He called for the Chancellor to restore the health in pregnancy grant, which he said would be “a relatively low-cost, proven mechanism to transform lives”.
Dromey also expressed support for a rumoured nightly tourist tax, which would give mayors the power to levy visitors a charge when staying at hotels and Airbnb-style accommodation.
“Other countries often allow local authorities to charge visitors staying overnight a small amount to help fund the amenities they benefit from. The Chancellor should allow mayors and councils to implement a visitor levy on overnight stays in their areas. It would cost visitors very little, but would add up and make a real difference.”
‘Chancellor must boost living standards and bring down bills’
Trade unions have unanimously called for greater levies on the rich, alongside a focus on addressing the cost of living for working people.
TUC general secretary Paul Nowak said that living standards and decent jobs should be at the core of Reeves’ Budget.
“Households up and down the country are still feeling the pinch, with real pay sluggish. After years of falling living standards, there is still much ground to make up.
“There are no easy fixes to longstanding challenges in the jobs market, with the fall in jobs, higher youth unemployment and persistently high use of zero hours contracts remaining significant concerns.
“The government is on the right track with serious public investment, stronger workers’ rights and improving the support people need to get into work.
“The Chancellor must build on this at the Budget by boosting living standards and bringing down household bills, sustaining investment in our infrastructure and continuing to repair our public services.
“The new jobs guarantee, which is a major step forward for boosting young people’s job prospects, must be ambitious in scale and scope – with early access for those who need it most.”
Unite, which has flirted with the prospect of disaffiliating from Labour, has said that next week’s Budget is a “critical point” for the union’s continued support for the party.
At Labour’s party conference in September, general secretary Sharon Graham said that affiliation was getting “harder and harder to justify” and urged Rachel Reeves to junk the fiscal rules.
She told Sky News: “Those fiscal rules need to be changed. Other countries are doing it. We should stop dancing around our handbag and do that. If the Budget is essentially nothing, it’s insipid, I think we’ve got a real problem on our hands – because without the money to make the change, then nothing is going to change.”
‘Historic opportunity to start to rebalance the country’
Britain’s largest trade union Unison has said the Budget is an “historic opportunity to start to rebalance the country” and called for “brave, progressive choices” to fix public services and tackle poverty.
General secretary Christina McAnea said: “We know the Labour government inherited a mess from the Conservatives, but the economy is still not working for many people who are struggling to afford the basics. This Budget is an opportunity to tax, not work.”
Some of the measures she is calling for is bringing capital gains tax in line with income tax, which she claims would raise up to £14 billion per year, as well as scrapping the two child benefit cap.
“People elected a Labour government because they wanted change and while there are things to celebrate – like the Employment Rights Bill that will transform the working lives of millions – there is a long, long way to go before people can start to feel better.
“This Budget is an historic opportunity to start to rebalance the country. To shift the dial on inequality and call time on child poverty. I hope the Chancellor is bold, grasps the nettle and makes history for the right reasons next week.”
TSSA general secretary Maryam Eslamdoust said that the Budget must be “true to Labour values” and support those struggling to make ends meet.
“If taxes are to rise to build the country and get the country moving, that is no bad thing – but it is those with the deepest pockets who should pay more.”
Eslamdoust said she wanted Reeves to raise income tax on high earners, alongside a wealth tax on the richest – describing it as “the only way forward”. However, increases in income tax have been ruled out by the Chancellor.
‘Pivotal moment’
The think tank ecosystem has also described this year’s Budget as a “pivotal moment” for the government amid difficult economic headwinds.
The Resolution Foundation, the organisation pensions secretary Torsten Bell chaired before his election to Parliament, has urged the Chancellor to make “sensible tax reforms” to raise the £26bn rumoured to be needed.
Research director James Smith said: “Budget-watchers are braced for a major downgrade to Britain’s productivity outlook. But ironically, a major upgrade to the outlook for pay could mean that the Chancellor’s fiscal black hole is less daunting than feared.
“However, reassuring the markets about the state of the public finances, paying for policy U-turns and providing fresh cost of living won’t come cheap. Tax rises of £26bn are likely to be needed.
“The Chancellor should look to make sensible tax reforms to car taxes, dividends and capital gains.”
However, Smith said that Reeves should switch two pence of employee National Insurance onto income tax to raise cash while protecting workers’ wages – a measure all but ruled out by the Chancellor.
Centre-left think tank Compass said that any break of manifesto commitments would be seen as a “sign of desperation”.
Director of the campaign group Neal Lawson said: “ Increasing taxes to enable social investment is a good thing if planned effectively, but breaking manifesto commitments like this is a sign of desperation that could backfire economically and politically.
“This is the inevitable outcome of a hyperfactional obsession that rejects progressive economic arguments in the name of party control: the country is now paying the price.”
Subscribe here to our daily newsletter roundup of Labour news, analysis and comment– and follow us on Bluesky, WhatsApp, X and Facebook.
Progressive think tank Common Wealth also stressed the need to address the cost of living in the Budget, but also called for the transfer of utilities back into public hands.
Deputy director Sarah Nankivell said: “This should be a budget to take on the cost of living crisis which is the greatest challenge people across the country are facing right now.
“Privatising our essential services has been a disaster. Since the 1990s, almost £200bn has been transferred from the public to shareholders through our transport fares and water and energy bills.
“Investing in buying back our utilities and public transport, at fair value, is critical if we are to get a handle on the cost of essentials. Without this, the government will struggle to achieve any durable increase in living standards.”
Share your thoughts. Contribute on this story or tell your own by writing to our Editor. The best letters every week will be published on the site. Find out how to get your letter published.
- SHARE: If you have anything to share that we should be looking into or publishing about this story – or any other topic involving Labour– contact us (strictly anonymously if you wish) at [email protected].
- SUBSCRIBE: Sign up to LabourList’s morning email here for the best briefing on everything Labour, every weekday morning.
- DONATE: If you value our work, please chip in a few pounds a week and become one of our supporters, helping sustain and expand our coverage.
- PARTNER: If you or your organisation might be interested in partnering with us on sponsored events or projects, email [email protected].
- ADVERTISE: If your organisation would like to advertise or run sponsored pieces on LabourList‘s daily newsletter or website, contact our exclusive ad partners Total Politics at [email protected].
labourlist.org (Article Sourced Website)
#Budget #MPs #trade #unions #tanks #Reeves #LabourList