After months of speculation the Budget confirmed what many had feared – that taxes are going up again. But reports of a black hole in spending were wide of the mark and the £26 billion of increased taxes will be used to fund ever higher welfare spending. This comes after a £40 billion tax hit a year ago – perhaps the largest in modern history - that we were promised would be a one off.
The biggest increase comes from extending the freeze on income tax thresholds for another three years. This is despite the Chancellor saying in her first Budget doing so would hurt working people – nearly a million people will pay higher amounts.
There will also be higher tax rates on savings, dividends, and pensions. The cash ISA limit is set to fall from £20,000 to £12,000 except for the over 65s. Fuel duty will increase from September 2026 as the 5p per litre duty cut will end. Aside from a minor change, the family farm and business inheritance tax will come in effect. Electric vehicle owners will face a new pay per mile charge. Mayors will be given the power to impose a tourist tax. Taxes on alcohol will also increase.
Rachel Reeves tried to present this tax raising budget as necessary. But in reality, this was a political choice in order to fund scrapping the two-child universal credit benefit and the welfare savings she dropped under pressure from Labour backbenchers earlier in the year. That cap was put in place because of fairness and the principle that families on welfare should face the same choices families not on welfare have to make about the size of their family.
One of the worst measures in the Budget was the big increase in business rates faced by leisure, retail, and hospitality businesses. Rather than the “golden age” of hospitality the Chancellor promised, they face a double whammy as increases in rateable value and removing the 40 per cent discount mean higher bills. UK Hospitality has estimated that a further 100,000 jobs could be lost in the sector as a result of the budget.
Much was made of freezes in rail fares and £150 energy bill reductions. While they may seem appealing these are being paid for by increasing overall taxation and with new levies the energy bill reduction will be more like £80. Living standards will barely improve over the next four years with growth also downgraded. Inflation is set to remain above the 2 per cent target meaning a more costly weekly shop.
So those were the Chancellor and Prime Minister’s choices. But there is an alternative. Rather than increasing welfare spending we need to reform the system and make savings. It is not sustainable nor fair to have 5,000 people a day signed on to long term sickness benefits. As a country we need to live within our means and by doing so we can take steps to get the economy moving again – scrapping stamp duty and business rates for shops and hospitality businesses, for example. Deliver real energy price reductions. Abolish the farm tax. Support young people to build up a £5,000 fund through their first job.
Those are some of the plans my party has put forward. While others want to higher taxes, borrowing, and spending, we choose a different course that will help create a more successful economy.
