Rachel Reeves is set to announce a £35 billion tax package today, described by critics as a major policy move. The budget, one of the most impactful in years, aims to boost growth through a strategy of high taxes, spending and borrowing.

Ms Reeves highlighted the need to invest for economic growth, saying restoring stability is crucial. She will become the first woman to present a Budget and plans to relax budget rules, allowing up to £50 billion of borrowing for infrastructure and green energy initiatives.

Ministers are concerned about market reactions as borrowing rates hit their highest level since the election, sparking fears of a rise in mortgage rates. Chancellor expects criticism from businesses over tax rises on employers, including a £20bn rise in National Insurance, which could lead to job losses and cuts salaries.

Reeves is about to cause pain.

“Difficult decisions on spending and social protection”

“I will not cut investment budgets” (private sector spending)

A £100 billion deficit requires £100 billion in public spending cuts and tax increases.

Will include debt interest (debt will increase by over £50 billion a year) pic.twitter.com/5mbjfbof4k

– Polite Revolution (/s) (@PoliteRevo3255) October 25, 2024

The CBI has warned that tax rises, alongside a significant increase in the minimum wage, could hamper the ability of businesses to invest in technology and innovation. Investors will face an increase in capital gains tax. Despite Labor’s promise to protect “working people”, most will be affected by the continued freeze on tax thresholds.

Robert Jenrick, a Conservative Party leadership contender, criticized the budget as misleading, saying it would harm workers and economic recovery. He accused Labor of misleading the public over tax increases.

Former Prime Minister Rishi Sunakready to meet the budget, noted that the expected increase in national insurance contradicts the manifesto of the Labor Party, which has pledged not to increase key taxes. He criticized Reeves for previously opposing the idea of ​​increasing employers’ NI.

Reeves recently softened his stance on protecting “workers” from tax hikes, pledging only to ensure there are no immediate increases to their paychecks. She plans to blame the budget challenges on the previous Conservative government, accusing Jeremy Hunt of leaving a £22 billion deficit and calling past spending plans illusory.

The budget should allocate more funds to the NHS and public services. Reeves believes these measures could lead to higher growth and improved services, although she acknowledges having made difficult decisions about taxes, spending and welfare.

Key measures include an increase in employers’ national insurance by up to 2p, a slight reduction in the threshold and extending the freeze on the income tax threshold for a further year. Private schools will lose VAT exemptions and business rates relief from January. Bus fares will see an increase, while the minimum wage will increase significantly.

Reeves will change budget rules to allow £50bn of extra borrowing for infrastructure, although she plans to spend only part of it today to avoid a negative market reaction. The chancellor will also end the temporary stamp duty cut, halve the tax exemption threshold and is expected to freeze fuel duty.

Inheritance tax breaks for agricultural land will be strengthened and the time period required for tax-free gift transfers could extend from seven to ten years. Capital gains tax on asset sales will rise, but second home owners could avoid further rises.

The funding will include billions for the NHS, £1.5bn for surgery centers and scanners and £1.4bn to rebuild schools. The windfall profits tax imposed on energy companies will increase, as will the tax on tobacco products and electronic cigarettes to discourage their consumption. The housing plans involve reducing discounts for social housing buyers in order to increase the social housing stock.