Hertfordshire, England, UK – Political commentators say the United Kingdom’s new budget will make or break the Labour Party.
Listen to the author read this article:
The spending plan, the country’s biggest economic event of the year, had been anxiously anticipated and discussed constantly. It dominated the UK’s political debate for weeks, intensified by leaks.
People constantly asked whether Chancellor of the Exchequer Rachel Reeves would raise the income tax.
Now, we have our answer.
In a speech focused on “Labour Values” that attacked conservative governments of the past, Reeves talked about lowering waiting times for the National Health Service, decreasing the national debt and shrinking the cost of living.
This was all to prepare the British people for what they do not want to hear: Reeves will “ask ordinary people to pay a little bit more” in order to increase tax revenues by £26 billion, the equivalent of $35 billion in the United States.
Instead of raising the dreaded income tax, Reeves chose instead to raise a variety of smaller taxes, calling on those with the “broadest shoulders” to pay a little more with higher taxes on property valued at more than £2 million.
Even so, the Office for Budget Responsibility predicted that one in four British people will pay tax at the higher rate by 2031.
Along with the tax hikes are planned improvements to public services, including scrapping the two-child benefit cap, which she said will lift 450,000 children out of poverty. It will also increase the state’s pension and provide greater support for special education services.
Some predictions and responses to the plan, released November 26, are becoming clear.
The Institute for Fiscal Studies published figures suggesting disposable income will rise by only 0.5% annually for the next five years, compared to the 2% annual average from the 1980s to early 2000s.
During the past two decades, though, the UK’s growth has slowed thanks to the COVID pandemic, Brexit and more.
The IFS suggested Reeves’ budget, which includes more flexibility to increase spending, will reduce the volatility that has plagued recent governments.
In short, Reeves has crafted improvements but also sacrifices in British spending priorities. What that means for Prime Minister Keir Starmer may depend on how the British people see the budget’s national impact as markets react.
Elodie Cockerell is a Junior Reporter with Youth Journalism International.
