Rachel Reeves is set to make commitments to safeguard the NHS and enhance the affordability of daily expenses for struggling individuals in a significant speech before the Budget. The Chancellor is anticipated to pledge to make crucial decisions to address a £20-30 billion shortfall in public finances. Reeves, preparing for her second Budget on November 26, emphasizes that these choices will have long-term implications for the economy.
Recently, Keir Starmer opted not to reiterate Labour’s promise to shield the working class from tax, VAT, and national insurance hikes. This decision has sparked speculation that Reeves might increase income tax during the Budget, potentially contradicting the party’s election promises.
In a statement from Downing Street, Reeves highlighted the importance of the upcoming decisions, emphasizing that they are vital for the economy’s future. She emphasized the need for people to grasp the challenges faced and the rationale behind her choices, asserting that they are in the country’s best interest.
Reeves stated her intention to present a Budget later in the month that will establish a strong economic foundation based on the government’s values of fairness and opportunity. The focus will be on priorities such as safeguarding the NHS, reducing national debt, and enhancing affordability for citizens.
One proposal under consideration by Reeves is to reduce energy bills by cutting the VAT rate on electricity and gas from 5%. This move is estimated to save the average household approximately £86 annually.
The Resolution Foundation has recommended that Reeves take decisive actions in the upcoming Budget to address public finances. One suggestion is to raise income tax by 2p, with a corresponding reduction of 2p in employee national insurance to mitigate the impact on workers.
James Smith, the research director at the Resolution Foundation, advocated for shifting 2p of employee National Insurance to Income Tax to generate revenue while safeguarding workers’ incomes. This strategy aims to create a Budget focused on price stability, income, and poverty alleviation, with an emphasis on fostering economic growth.