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
2025 among world’s three hottest years on record, WMO says
- All eight datasets confirmed that the last three years were the planet’s three hottest since records began, the WMO said
- The slight differences in the datasets’ rankings reflect their different methodologies and types of measurements
BRUSSELS: Last year was among the planet’s three warmest on record, the World Meteorological Organization said on Wednesday, as EU scientists also confirmed average temperatures have now exceeded 1.5 degrees Celsius of global warming for the longest since records began.
The WMO, which consolidates eight climate datasets from around the world, said six of them — including the European Union’s European Center for Medium-Range Weather Forecasts (ECMWF) and the British national weather service — had ranked 2025 as the third warmest, while two placed it as the second warmest in the 176-year record.
All eight datasets confirmed that the last three years were the planet’s three hottest since records began, the WMO said. The warmest year on record was 2024.
THREE-YEAR PERIOD ABOVE 1.5 C AVERAGE WARMING LEVEL
The slight differences in the datasets’ rankings reflect their different methodologies and types of measurements — which include satellite data and readings from weather stations.
ECMWF said 2025 also rounded out the first three-year period in which the average global temperature was 1.5 C above the pre-industrial era — the limit beyond which scientists expect global warming will unleash severe impacts, some of them irreversible.
“1.5 C is not a cliff edge. However, we know that every fraction of a degree matters, particularly for worsening extreme weather events,” said Samantha Burgess, strategic lead for climate at ECMWF.
Burgess said she expected 2026 to be among the planet’s five warmest years.
CHOICE OF HOW TO MANAGE TEMPERATURE OVERSHOOT
Governments pledged under the 2015 Paris Agreement to try to avoid exceeding 1.5 C of global warming, measured as a decades-long average temperature compared with pre-industrial temperatures.
But their failure to reduce greenhouse gas emissions means that target could now be breached before 2030 — a decade earlier than had been predicted when the Paris accord was signed in 2015, ECMWF said. “We are bound to pass it,” said Carlo Buontempo, director of the EU’s Copernicus Climate Change Service. “The choice we now have is how to best manage the inevitable overshoot and its consequences on societies and natural systems.”
Currently, the world’s long-term warming level is about 1.4 C above the pre-industrial era, ECMWF said. Measured on a short-term basis, average annual temperatures breached 1.5 C for the first time in 2024.
EXTREME WEATHER
Exceeding the long-term 1.5 C limit would lead to more extreme and widespread impacts, including hotter and longer heatwaves, and more powerful storms and floods. Already in 2025, wildfires in Europe produced the highest total emissions on record, while scientific studies confirmed specific weather events were made worse by climate change, including Hurricane Melissa in the Caribbean and monsoon rains in Pakistan which killed more than 1,000 people in floods.
Despite these worsening impacts, climate science is facing political pushback. US President Donald Trump, who has called climate change “the greatest con job,” last week withdrew from dozens of UN entities including the scientific Intergovernmental Panel on Climate Change.
The long-established consensus among the world’s scientists is that climate change is real, mostly caused by humans, and getting worse. Its main cause is greenhouse gas emissions from burning fossil fuels like coal, oil and gas, which trap heat in the atmosphere.
