UK (Parliament Politics Magazine) – Chancellor Rachel Reeves admits working people will pay more under her £26bn tax plan but insists Labour’s manifesto pledge on taxes stays intact.
As reported by The Independent, Rachel Reeves said working people will “contribute a bit more” following her £26bn tax increase but denied breaking the party’s manifesto promise on taxes.
The Office for Budget Responsibility said the chancellor’s measures, including increasing taxes for 1.7 million people, raise the overall tax burden to a record high.
What did Rachel Reeves say about the Budget and taxes on working people?
Rachel Reeves insisted the Budget did not break Labour’s manifesto promise on taxes for working people, saying that it concerned only income tax, National Insurance, and VAT.
She said,
“But I do recognise that yesterday, I have asked working people to contribute a bit more by freezing those thresholds for a further three years from 2028. I do recognise that that will mean that working people pay a bit more.”
Pressed on whether Labour had broken its pledge not to raise taxes on working people, the chancellor declined to confirm any breach.
She said,
“If you go on to read the next line, it talks about the rates, but I am not denying that this has an impact on working people.”
Commenting on rising welfare costs, Ms Reeves said,
“Lots of people have tried to write me off over the last 16 months, and you’re not going to write my obituary today.”
She stated,
“I’m not going to apologise for lifting the two-child limit.”
The chancellor rejected claims that her tax increases on working people were intended to finance welfare spending, saying, “I don’t accept that.”
Ms Reeves said,
“The OBR say that their revisions to productivity, reflecting the Conservatives’ legacy, is going to mean £16 billion less tax revenue, and as a result, we have to fill that gap. But if we can grow the economy, as I’m determined to do, we can get that money back.”
She pushed back against claims that her Budget was intended to appease Labour backbenchers and protect her position, after raising taxes to boost welfare spending.
Ms Reeves said,
“This was my budget yesterday, focused on my priorities and the government’s priorities, cutting the cost of living, cutting NHS, waiting lists, and cutting borrowing and debt.”
She rejected suggestions that the Budget rewarded inactivity, pointing out that 60% of families set to benefit are in work.
The chancellor said,
“I don’t think children should be punished by this pernicious policy any longer. And the cost to society of this is huge, the cost for councils of temporary accommodation, when people can no longer afford the rent, putting families in B&Bs, kids having to move to school all the time because parents have moved from B&B to another lot of temporary accommodation, and there’s costs for years to come, because all the evidence shows that kids that are growing up poor are less likely to get into work and more reliant on the welfare state in the future for them.”
She continued,
“So this is a good investment in those kids, to give them the chances that I want for my kids, and everyone wants for their kids. It also saves money for taxpayers on that accommodation, on those additional health costs, and ensuring that those kids grow up to be productive adults.”
How did Rachel Reeves respond to the OBR Budget leak?
Rachel Reeves said OBR chief Richard Hughes “let me down” with the early Budget leak but insisted she still has confidence in him.
She announced an investigation into the leak that saw the OBR’s Budget response published online an hour before her Commons address.
The chancellor continued,
“Richard Hughes wrote to me yesterday evening apologising for their error. It was a serious error and a serious breach. They have announced an investigation which will report to me very quickly, but I do have confidence in Richard and the OBR, they do important work. But what happened yesterday, it did let me down and and it shouldn’t have happened and it must never happen again.”
What did opposition parties and economists say about Rachel Reeves’ Budget and growth?
The Liberal Democrats have criticized Labour’s Budget as an “assault on the squeezed middle,” noting that OBR forecasts show one in four workers will face higher or additional income tax by 2030-31.
The party’s Treasury spokeswoman, Daisy Cooper stated,
“This Budget was an assault on the squeezed middle. This Labour Government is abandoning the very voters who put them into power and hammering them with years more of unfair tax hikes.”
She added,
“There’s an easy way to get out of this vicious cycle and give people hope: go for growth through a much closer trade deal with the EU, including a customs union to tear up red tape and back British businesses.”
Experts said the chancellor’s Budget is unlikely to deliver any meaningful economic growth.
Chantal Van Stipriaan, partner at Blick Rothenberg, called the Budget chaotic and said it will be remembered for many years to come.
She said,
“The stress that has been caused by leaking throughout this process has been a disaster and has caused undue stress for working people, pensioners, and businesses.”
Ms Stipriaan stated,
“The freezing of the thresholds for an extra three years, a classic stealth tax, will mean not only the middle class families are going to pay more tax, many additional relatively low income individuals will be brought into the tax net, including people who will have to file tax returns for the first time, such as pensioners.”
She continued,
“The Budget will most likely result in a higher inflation and a higher unemployment and it’s unlikely it will benefit the economic growth of the country.”
What are the key points of the UK’s 2025 Budget?
- Income tax and national insurance thresholds were frozen for three years, affecting more workers.
- Property, dividend, and savings taxes rise; a high-value council tax surcharge is introduced.
- Pension contribution cap set at £2,000; extra national insurance raised on excess contributions.
- Two-child benefit limit abolished, costing £3bn by 2029-30 to support low-income families.
- Energy bills reduced by £150 next year; ECO home insulation scheme scrapped.
- National minimum wage and living wage increased; fuel duty frozen until Sept 2026.
- £26bn in tax rises overall; the wealthiest pay more, no increase in headline income tax, VAT, or national insurance.
