Labour budget to increase taxes for some, £40bn needed
New Labour budget to hike taxes for some, seeks £40bn to cover shortfall
The definition of a “working person” will be crucial next week when the new Labour government introduces its much-anticipated budget. Sir Keir Starmer frequently used the term “working people” during the general election to assure voters he wouldn’t raise their taxes. However, the upcoming budget indicates that taxes will increase for some, despite the prime minister’s refusal to confirm this during an interview at the Commonwealth leaders summit in Samoa on Thursday. The closest he came to acknowledging it was by stating, “we’re not going back to austerity,” implying no significant spending cuts.
Treasury insiders reveal that the government needs to find £40bn to address public finance shortfalls, necessitating both tax rises and spending cuts. The key question is: Who will be affected by these tax increases? Given that many employed individuals consider themselves “working people,” there is a risk that a significant number may feel betrayed if they face higher taxes.
Labour is also under pressure to improve local services, with councils claiming there is no more “fat to cut.” Additionally, the UK plans to provide Ukraine with a £2.26bn loan to support its fight against Russia, with no repayment required. Meanwhile, Health Secretary Wes Streeting has admitted that NHS reform will not commence immediately.
🚨 Labour are looking to make £40 billion of tax rises and spending cuts.
🥀 The Chancellor is set to break Anas Sarwar's election promise of "no austerity under Labour".
🏴 @ShonaRobison and @theSNP are calling for an end to austerity and for investment in public services. pic.twitter.com/FMqsP51D76
— Dundee SNP (@DundeeSNP) October 21, 2024
On Thursday, the prime minister provided a clearer definition of “working people.” He indicated that those whose income derives from assets such as shares and property, in addition to work, would not fall under Sir Keir’s definition. This suggests potential increases in capital gains taxes and reflects Sir Keir’s belief that the wealthy, regardless of their working status, should pay more tax.
In Sir Keir’s view, “working people” are those with a persistent anxiety about their financial security and the reliability of public services. These are the individuals he entered politics to support, aiming to ensure they had stable jobs and better opportunities.
But who exactly are these people? Are they the “white van man” concerned about fuel duty increases, or the nurse worried about rising council tax? Could they be the millions of basic-rate taxpayers who might be pushed into higher tax brackets if the chancellor extends the Conservatives’ tax band freeze? Extending this freeze beyond 2028 could raise £7bn annually, but if implemented, many of Sir Keir’s “working people” might feel disappointed by the government.
In the election, the prime minister’s broad definition of a working person allowed him to connect with various voter groups. However, as the government makes tough decisions to fill gaps in public finances, the impact of these decisions will become clear. There is now a better understanding of who the prime minister aims to shield from tax rises in this budget, but whether his chancellor will adhere to that remains to be seen.
What Other Media Are Saying
- The Guardian reports that cross-party MPs urge Chancellor Rachel Reeves to impose a 2% tax on wealth above £10m to address a £40 billion deficit and reduce inequality, backed by public support for wealth taxation.(read more)
- Sky News reports Rachel Reeves seeks £40bn to fill a financial black hole, sparking tax rise and spending cuts speculation as Labour addresses legacy overspending and fiscal stability.(read more)
Frequently Asked Questions
Here are some common questions asked about this news
Who are considered ‘working people’ according to Sir Keir Starmer?
Those with persistent anxiety about financial security and public services.
Will taxes increase for ‘working people’ in the upcoming budget?
The budget indicates some taxes will rise, though ‘working people’ may be shielded.
What is the government’s financial challenge?
The government needs to find £40bn to address public finance shortfalls.
How might the government raise additional funds?
Through tax rises and spending cuts, potentially including capital gains taxes.
Is the UK providing financial support to Ukraine?
Yes, the UK plans to provide Ukraine with a £2.26bn loan with no repayment required.
