Britain's new Chancellor of the Exchequer, Rachel Reeves, has unveiled the first his budget, in which he announced the biggest tax increases in three decades. She accused the Conservative Party, which has been in power for 14 years, of leaving public services in dire straits. Reeves said he would raise taxes by £40bn a year, a significant proportion of which would go to businesses, to cover the £22bn deficit inherited from Labour, reports "Reuters"
"Any finance minister would face this reality," Reeves said in his speech. "And any responsible minister would take action. That is why today I am restoring the stability of public finances and strengthening our public services."
Reeves announced that social security contributions paid by employers would increase by 1.2 percentage points from April to 15%, as the threshold for their pay was lowered, bringing in an extra £25bn a year over five years. Other revenue-raising measures are also included, such as changes to the rules for taxation of capital gains, inheritances and taxes on private investment funds and non-domiciled individuals.
Prime Minister Keir Starmer warned that those with the "broadest shoulders" they will have to pay more taxes. Reeves, however, ruled out an increase in individual tax rates by extending the freeze on payment thresholds until 2028/29.
Initial investor reaction to Reeves' speech was positive, with government bond prices rising during her address to Parliament. Reeves also indicated that economic growth is expected to be higher this year and in 2025, but will be lower over the next three years.
Reeves, a former Bank of England economist, is expected to be more cautious on debt management than former prime minister Liz Truss, whose plans for big tax cuts led to a collapse in British debt prices and her resignation in 2022.< /p>