Labour’s Rachel Reeves unveils plan with tax rises

The UK is planning to catalyze £70 billion of investment through the National Wealth Fund, a sovereign wealth fund aimed at speeding up economic growth and transitioning to clean energy. Capital gains tax will rise for lower and higher rate taxpayers, while fuel duty will be frozen and National Insurance rates will increase. The Office for Budget Responsibility has upgraded UK growth forecasts, and there will be fresh investment in HMRC to curb tax avoidance. The budget includes £40 billion of tax rises to address public finances and invest in public services. The British Sterling extended losses as Finance Minister Rachel Reeves presented the budget. Karen Gilchrist reports that Rachel Reeves is emphasizing that she is working to restore stability to the UK’s public finances and rebuild public services. She repeated claims of a £22 billion “black hole” in the previous Conservative government’s spending plans. The Office for Budget Responsibility is set to release a report addressing this claim soon. Reeves is unveiling a detailed breakdown of the inherited black hole, which she says shows unfunded pressures on public finances. Former Finance Minister Jeremy Hunt has disputed these claims, calling them troubling. Reeves has started delivering the 2024 budget, aiming to bring economic stability and invest in the country’s future. Business leaders are calling for clarity on the UK’s industrial strategy and expressing concerns about proposed tax hikes. Former Conservative Investment Minister Dominic Johnson believes the allegations of a spending gap are disingenuous and argues against tax hikes to boost growth. – Jenni Reid Bond yields rose to multi-month highs as concerns grew over potential changes in borrowing rules in the upcoming budget announcement by Reeves. The UK’s minimum wage will increase for workers aged 21 and over, with further support measures expected in the budget. Economists anticipate tax rises and increased public spending, with changes to rules on non-doms, energy profit levy, and VAT on private school fees. Reeves plans to alter fiscal rules to allow for more investment, but assures that it won’t lead to austerity measures. Labour leaders have hinted at painful decisions to address budget shortfalls, with a focus on ensuring economic growth in the future. Starmer and Reeves are meeting before the Budget on Wednesday, with Reeves promising no return to austerity and pledging to increase investment in infrastructure and the energy transition. They face the challenge of boosting public investment while meeting fiscal rules to balance the budget. The bond market will closely watch the budget response after a past spike in yields due to unfunded tax cuts. Analysts believe that the current macroeconomic conditions are less likely to cause panic in the bond market, with inflation falling and interest rates expected to decrease. Labour’s fiscal prudence and the need for less government borrowing should also ease bond market nerves.