Chancellor Rachel Reeves has presented a Budget which will raise taxes by £40bn, while promising to “repair the foundations” of the economy and fix public finances.

In Labor’s first budget since 2010 – and the first ever presented by a woman – Ms Reeves promised to “invest, invest, invest”.

She promised billions in extra spending on schools and the National Health Service.

But she added that the “black hole” left by the Tories would require tens of billions in extra taxes.

Ms Reeves claimed the scale of the public spending problems she had inherited was worse than previously thought.

She said the £22 billion “black hole” left by the Tories in this year’s finances showed they were “hiding the reality of their public spending plans”, with recurring problems in years to come .

Ms Reeves also promised to set aside £11.8 billion to compensate those affected by the infected blood scandal and £1.8 billion to compensate victims of the Post Office Horizon scandal.

The Chancellor said: “The black hole in our public finances this year, which recurs every year, the compensation they have failed to fund and their failure to assess the scale of the challenges facing our services This budget increases taxes by £40 billion.

“Any chancellor here today would face this reality. And any responsible chancellor would act.

“This is why today, I am restoring the stability of our public finances and I am rebuilding our public services. »

It confirmed a £25 billion drain on employers’ national security contributions, with higher rates and a lower starting threshold.

The rate will increase by 1.2 percentage points to 15% from April 2025, with payments starting when an employee earns £5,000, up from £9,100 currently.

“I know it’s a difficult choice. I do not take this decision lightly,” Ms Reeves said.

The Chancellor announced a £2.5 billion increase in capital gains tax by increasing the lower rate from 10% to 18% and the higher rate from 20% to 24%.

She also confirmed changes to inheritance tax, including the inclusion of pension funds in the tax from April 2027, and reforms to agricultural and commercial property reliefs, raising a total of €2 billion. pounds sterling per year.

Ms Reeves, who stressed her commitment to helping “working people”, promised to end the freeze on income tax and national insurance thresholds.

As incomes rise, keeping the threshold frozen would have forced more people to pay taxes or move to higher brackets.

“From 2028-29, personal tax thresholds will be raised again in line with inflation,” she said.

“When it comes to tax choices, this government chooses each time to protect workers. »

Forecasts from the Office for Budget Responsibility suggest that gross domestic product growth will be higher in 2024 than forecast in March – increasing it from 0.8% to 1.1% and from 1.9% to 2.0%. in 2025.

But there are deteriorations in the following years – from 2% expected in 2026 to 1.8%, from 1.8% in 2027 to 1.5% and from 1.7% in 2028 to 1.5%.

Borrowing is expected to reach £127 billion this year.

In other measures:

– The freeze on fuel duty will continue, including maintaining the existing 5p reduction.

– A flat tax will be applied to all vaping liquids from October 2026, alongside a further one-off increase in tobacco tax to encourage people to quit smoking.

– The tax on the soft drinks industry will be increased to account for inflation.

– While alcohol duty rates on non-draught products will increase in line with RPI inflation, alcohol duty will be reduced by 1.7%, knocking a penny off a pint at the pub.

– The Government will commit the funding needed to extend the HS2 high-speed rail line to Euston in central London.

– There will be “more than £5 billion of government investment” in housebuilding, including £1 billion to remove dangerous cladding from buildings.

– Stamp duty in addition to property tax for second homes will increase by two percentage points to 5% from Thursday.

– The weekly wage cap for Carer’s Allowance will increase to the equivalent of 16 hours per week at the National Living Wage, the largest increase since the allowance was introduced.

– Ministries will have to achieve a “productivity, efficiency and savings target” of 2%.

– There will be a £22.6 billion increase in the daily health budget as well as a £3.1 billion increase in the capital budget, which Ms Reeves called “the biggest growth in real terms of day-to-day spending in the NHS”. outside of Covid since 2010.”

– Ms Reeves pledged £1.4 billion to rebuild more than 500 schools as part of a 19% real-terms increase in the Department for Education’s capital budget, as well as £2.1 billion pounds sterling for the maintenance of schools.

– The Chancellor has promised to save £4.3 billion a year on the cost of welfare by tackling fraud and recovering debts.