Chancellor Rachel Reeves is gearing up for the second Budget of her tenure as Labour chancellor, set to be unveiled on Wednesday. All eyes are on Reeves as she faces the challenge of filling a £20 billion hole in the public finances. In light of this, there has been speculation that she will freeze tax thresholds, a move that has been heavily criticized by both Labour and Conservative party members.
The decision to freeze tax thresholds has been labeled as a “stitch-up” by critics, with an estimated nine million taxpayers set to be affected. This move, if implemented, will have a significant impact on middle and high-income earners. Under this policy, the tax thresholds at which income tax and higher rates of income tax start to apply will remain stagnant, causing what is known as a “stealth tax”.
The term “stealth tax” refers to the process of inflation pushing taxpayers into higher tax brackets, even if their salaries remain the same. This can often result in individuals paying more in taxes without a corresponding increase in their income. This has been a point of contention among both the Labour and Conservative parties, with both sides making pledges to not increase taxes for working people.
Labour’s 2024 manifesto specifically stated that there would be no increases in income tax, national insurance contributions, or VAT for working people. However, a freeze on tax thresholds would technically not breach this commitment. When questioned about the issue, Prime Minister Keir Starmer has failed to give a definitive answer, leaving the door open for the possibility of this policy being implemented.
Meanwhile, the Conservative party froze tax thresholds after the pandemic, with these freezes set to continue until 2028. However, there are reports that Chancellor Reeves is not expected to extend this freeze for another two years, raising an additional £8 billion. This decision, if carried out, will push an estimated 1.3 million people into a higher tax bracket, on top of the 7.7 million who have already been affected by the Conservative’s previous actions since 2021.
The Liberal Democrats have conducted an analysis based on figures from the Office for Budget Responsibility and research from the Commons Library, which shows that this move will have a significant impact on taxpayers. Daisy Cooper, the deputy leader of the Liberal Democrats, has labeled the situation as a “staggering” nine million people caught in the crossfire of a “stealth tax stitch-up” between the two major parties.
Cooper also pointed out the hypocrisy of Labour’s decision, noting that Chancellor Reeves herself accused the Conservative government of “picking the pockets” of working people back in 2021. Now, Labour is planning to do the same, which Cooper has called “rank hypocrisy”. She emphasized that while the two parties squabble over politics, it is ordinary Brits who will ultimately pay the price.
Families across the country are becoming increasingly frustrated with being “milked” for their hard-earned money. They are tired of politicians making grand promises but failing to deliver on them. The constant back and forth between the two major parties only serves to further erode trust in the government and its ability to effectively manage the country’s finances.
In the midst of all this, many are looking to Chancellor Reeves for decisive action and clear direction. The responsibility falls on her shoulders to make difficult decisions that will have a lasting impact on the economy and people’s lives. This Budget announcement is a pivotal moment for the country, and it is crucial that the government makes responsible and fair decisions.
As the Chancellor prepares to unveil her Budget on Wednesday, the focus must be on finding a balance between generating revenue to fill the gap in public finances and ensuring that working people are not unfairly burdened by increased taxes. It is a delicate balancing act, but one that must be done with the best interests of the country and its citizens at heart.
In the end, the Budget announcement will affect everyone in some way. Whether it is through increased taxes or cuts in public spending, the decisions made will have a ripple effect on the economy and the lives of ordinary people. It is a responsibility that must be taken seriously, and the Chancellor must ensure that her decisions are made with transparency and fairness in mind.
The Budget announcement is a crucial moment for the country, and it is essential that all parties work together to find a solution that benefits everyone. Rather than squabbling over politics and making promises they cannot keep, politicians must put the needs of the people first. This Budget
