Chancellor Rachel Reeves laid out a string of cost of living measures to help lower income households as she set out her Budget, with plans for £26billion in tax rises
Rachel Reeves promised relief to hard-up households in the Budget with a raft of cost of living measures funded by a £26billion tax raid.
Her big moment was initially marred by an unprecedented blunder by the Office for Budget Responsibility, which accidentally leaked key details more than 30 minutes before she began her speech. But the furious Chancellor, who found out in the Commons chamber, came out fighting as she promised to ease pressure on ordinary Brits with help on energy bills, wages, rail fares and fuel costs.
“I said I would cut the cost of living, and I meant it. This Budget will bring down inflation and provide immediate relief for families,” she said. Labour MPs cheered raucously as she announced plans to scrap the punitive Tory two-child benefit limit, which will lift 450,000 children out of poverty.
Ms Reeves also vowed to rip up the so-called rape clause, where women must prove if their children have been conceived non-consensually to qualify for support.
READ MORE: Huge cheers as Rachel Reeves abolishes DWP two-child benefit limit
She said: “I’m proud to be Britain’s first female Chancellor of the Exchequer. I take the responsibilities that come with that seriously. I will not tolerate the grotesque indignity to women of the ‘rape clause’ any longer. It is dehumanising. It is cruel, and I will remove it from the statute book.”
She set out cost of living help to mitigate the impact of tax hikes as she admitted working people would feel the impact of her decision to extend the freeze on tax thresholds. The move, sometimes dubbed a stealth tax, means 1.7 million people will be dragged into paying higher tax, including 780,000 people brought into paying the basic rate.
Ms Reeves said she must ask everyone “to make a contribution” to fill a hole in the public finances. But she also went after wealthier Brits by slapping a mansion tax on properties worth over £2million, and targeting rental income, dividends and savings.
Gambling taxes worth more than £1billion were imposed on remote gaming and online betting. In-person gambling and horse racing were left unchanged – and bingo duty will be abolished entirely from April.
Ms Reeves increased taxes by £40billion in last year’s Budget and was forced to come back for more after sluggish growth, global economic turmoil and U-turns on cuts to welfare and winter fuel. She also built in nearly £22billion of headroom to protect the UK from future shocks.
The economic picture remains challenging, as the OBR said the economy would grow at a slower pace than expected from next year. Analysis from the Joseph Rowntree Foundation (JRF) found that living standards are still set to fall across the rest of the parliament but the Budget decisions will make this less painful for low-income households.
Speaking to reporters afterwards at a hospital in London, Ms Reeves said: “The biggest winners are those on the lowest incomes and those who we’re asking to pay more are those with the broadest shoulders, those who have properties worth more than £2million, the landlord who pays less tax than their tenant.
“Those are the right things to do, and they’re progressive reforms. And because of that, we’ve managed to keep the contribution from working people as low as possible.”
The Institute for Fiscal Studies think tank argued she had broken Labour’s manifesto pledge to protect working people from hikes to key taxes.
IFS director Helen Miller said she had “found a way to cobble together a sizeable package without increasing the main rates of national insurance contributions, VAT or income tax”.
But she added: “Because it includes a freeze in national insurance thresholds, it also breaches the Government’s manifesto tax promise not to increase national insurance – as does the cap on salary sacrifice. And, as the Chancellor acknowledged, it clearly represents a tax rise on working people.”
Ms Reeves rejected the accusation, but added: “I do recognise that I was asking ordinary people to pay a little bit more. But I’ve managed to keep that contribution as low as I possibly can by closing loopholes and asking those with the broadest shoulders to pay more.”
TUC General Secretary Paul Nowak told the Mirror that the Budget would turn the page on the destruction the Tories caused to Britain. He said: “Fourteen years of Conservative government took a wrecking ball to living standards.
“Pay packets were squeezed to breaking point. Child poverty exploded to Dickensian levels. Public services were slashed to the bone. Ordinary people paid the price. This Budget will help turn the page on that long, bleak Tory era.”
Gordon Brown said Ms Reeves had done more to help Britain’s poorest kids than the last seven Tory chancellors. The Labour former PM said: “Ending the two-child rule is more than securing the immediate release of children from poverty.
“It is an invest-now-save-later policy designed, as an excerpt from the soon-to-be-published Child Poverty Review says, “to help people succeed”, with improved educational outcomes and greater adult earnings, which will ultimately pay for itself with higher tax receipts.”
But business chiefs said growth had stalled. Rain Newton-Smith, CBI Chief Executive, said: “While the Chancellor has succeeded in creating the fiscal headroom she needed, a scattergun approach to tax risks leaving the economy stuck in neutral.
“Adding national insurance to salary sacrifice pension contributions curtails savings and pushes up the cost of employment. Coming on top of the rise to the National Living Wage, increased employment costs make it even more expensive for employers to offer jobs to young people and jobseekers.”
Kate Nicholls, Chair of UKHospitality, also warned of the impact on firms. She said: “Wage rises, holiday taxes and monumental increases in rateable values have put even further pressure on hospitality businesses, as a result of this Budget. A 5p business rates discount is simply not enough to offset these costs and redress the damage it will do to business viability and job opportunities.
