LONDON: Britain’s new Labour government on Wednesday announced major tax hikes and higher borrowing to meet Prime Minister Keir Starmer’s aim of investing for long-term growth.
In the highly-anticipated fiscal update — the first under the center-left government after 14 years of Conservative rule — finance minister Rachel Reeves said tax increases would raise an additional £40 billion ($52 million).
Addressing parliament in a speech lasting more than one hour, Reeves also confirmed changes to fiscal rules that will allow the government to invest billions more in public services.
“This government was given a mandate,” Reeves told MPs.
“To restore stability to our country and to begin a decade of national renewal. The only way to drive economic growth is to invest, invest, invest,” she insisted.
Labour won a landslide general election in July and had already announced a raft of economic measures, including improved workers’ rights and minimum wages, a vast green-energy plan and plans for mass building of homes.
Ahead of the budget, it also drew strong criticism for scrapping a winter-fuel benefit scheme for millions of pensioners, hurting Starmer’s approval rating in polls.
“I am restoring stability to our public finances and rebuilding our public services,” Reeves said Wednesday.
Reeves said £25 billion would come from hiking employers’ national insurance — a payrolls tax used to help pay for social care.
Changes to inheritance tax will raise more than £2 billion while the government is also hiking taxation on capital gains and property purchases as part of its plans to claw back money.
The pound won back ground as Reeves spoke, while London’s stock market was little changed.
“At this stage, massive tax rises have not spooked financial markets,” said Kathleen Brooks, research director at traders XTB.
The government kept its pledge not to raise income taxes, employee national insurance charges, or value added tax.
Outgoing Tory leader Rishi Sunak, Britain’s former prime minister, said the budget contains “broken promise after broken promise.”
Ahead of her tax and spend plans, Reeves made a technical change to the way UK debt is measured to allow her to borrow more, even though the country’s public sector borrowing is now at levels last seen in the 1960s.
To boost investment, the chancellor will use a wider measure of debt that takes into account the future returns on investment.
Reeves on Wednesday said the extra investment in capital infrastructure projects would start to “repair the fabric of our nation.”
The government will invest billions of pounds to rebuild schools, hire teachers and fund childcare.
In a surprise move, she extended the freeze on fuel duty until next year.
The cash-strapped National Health Service will receive a substantial boost, with the day-to-day health budget receiving an increase of nearly £23 billion.
Alongside the budget, Reeves said Britain’s economy was set to grow faster than forecast this year and next.
The nation’s gross domestic product will expand 1.1 percent in 2024 and by 2.0 percent next year — above estimates given in March by the Office for Budget Responsibility (OBR), Britain’s fiscal watchdog.
Britain is benefiting from its annual inflation rate dropping to under the Bank of England’s 2.0-percent target, easing a cost-of-living crisis.
The International Monetary Fund this month also estimated that Britain’s economy would grow 1.1 percent in 2024.
Looking beyond next year, the OBR on Wednesday downgraded Britain’s growth forecasts for the 2026-2028 period.
UK’s Labour government hikes taxes in first budget
https://arab.news/2t4xe
UK’s Labour government hikes taxes in first budget
- Reeves said £25 billion would come from hiking employers’ national insurance — a payrolls tax used to help pay for social care
- Changes to inheritance tax will raise more than £2 billion while the government is also hiking taxation on capital gains and property purchases
Zelensky presses EU to tap Russian assets at crunch summit
- “Russian assets must be used to defend against Russian aggression and rebuild what was destroyed by Russian attacks. It’s moral. It’s fair. It’s legal,” Zelensky said
- German Chancellor Friedrich Merz was among those agreeing strongly as he said there was “no better option“
Brussels: Ukrainian President Volodymyr Zelensky told EU leaders Thursday they had the “moral” and legal right to use frozen Russian assets to fund Kyiv — as pressure grew on key player Belgium to drop its opposition at a summit showdown.
The 27-nation bloc is scrambling to bolster its ally Ukraine, as US President Donald Trump pushes for a deal with President Vladimir Putin to end the fighting.
Officials have insisted leaders’ talks in Brussels will last as long as it takes to hammer out an agreement, saying both Ukraine’s survival — nearly four years into the war — and Europe’s credibility are at stake.
“We will not leave the European summit without a solution for the funding of Ukraine,” European Commission head Ursula von der Leyen said.
The EU’s executive wants to fund a loan to Ukraine by using frozen assets from Russia’s central bank, though it is holding on to a back-up plan for the bloc to raise the money itself.
The EU estimates Ukraine needs an extra 135 billion euros ($159 billion) to stay afloat over the next two years — with the cash crunch set to start in April.
Zelensky said Kyiv needed a decision on its financing by the end of the year and that the move could give it more leverage in talks to end the war.
“Russian assets must be used to defend against Russian aggression and rebuild what was destroyed by Russian attacks. It’s moral. It’s fair. It’s legal,” Zelensky said.
German Chancellor Friedrich Merz was among those agreeing strongly as he said there was “no better option.”
But Belgium’s Prime Minister Bart De Wever — who held talks with Zelensky on the sidelines — seemed unconvinced so far.
“I have not seen a text that could persuade me to give Belgium’s agreement,” he told Belgian lawmakers before the summit kicked off.
The vast bulk of the assets are held by international deposit organization Euroclear in Belgium, and the government fears it could face crippling financial and legal reprisals from Moscow.
EU officials say they have gone out of their way to allay Belgian worries and that multiple layers of protection — including guarantees from other member states — mean the risks are minimal.
“At this stage, the guarantees offered by the Commission remain insufficient,” De Wever said.
- Ukraine’s looming cash crunch -
In a bid to plug Kyiv’s yawning gap, the Commission has proposed tapping 210 billion euros of frozen assets, initially to provide Kyiv 90 billion euros over two years.
The unprecedented scheme would see the funds loaned to the EU, which would then loan them on to Ukraine.
Kyiv would then only pay back the “reparations loan” once the Kremlin compensates it for the damage.
In theory, other EU countries could override Belgium and ram the initiative through with a weighted majority, but that would be a nuclear option that few see as likely for now.
De Wever insisted that the EU should go for its alternative plan of raising money itself — but diplomats said that option had been shelved as it needed unanimity and Hungary was firmly against.
Bubbling close to the surface of the EU’s discussion are the US efforts to forge a deal to end the war.
Zelensky said Ukrainian and US delegations would hold new talks on Friday and Saturday in the United States.
He said he wanted Washington to give more details on the guarantees it could offer to protect Ukraine from another invasion.
“What will the United States of America do if Russia comes again with aggression?” he asked. “What will these security guarantees do? How will they work?“
