Budget 2024 latest: Reeves admits ‘taxes will need to rise’ in stark warning to public

There have been rumours Labour could tweak the fiscal rules the Government uses to constrain its own spending and tax decisions.

Chief among those under consideration for change is the period over which the Government aims to see national debt falling as a percentage of the UK’s overall economic output.

Relaxing this rule to a longer period than the current five-year target, or removing spending by certain public organisations from the total, could allow the Chancellor to borrow more cash to invest in major infrastructure projects such as railways, roads, hospitals and new prisons.

Public services including the NHS and local councils are struggling across the UK, as they grapple with an ageing population, backlogs caused by the pandemic, and the aftermath of the coalition-era austerity programme.

Labour has brokered a pay deal for a swathe of public servants after several years of industrial action, a spending commitment worth £9 billion by some estimates.

Ms Reeves has also claimed the previous Conservative government did not account for the costs of some of its promises, which now need to be met or scaled back.

These commitments, alongside keeping the Government’s ongoing costs “standing still”, made up the so-called £22 billion “black hole” in the public finances which Labour said it needs to fill.

However, Ms Reeves is said to have since identified a far larger £40 billion funding gap which she will seek to plug to protect key departments from real-terms cuts and put the economy on a firmer footing.

The wider benefits of scrapping the two-child limit such as the future earnings potential of young people who avoid poverty as a result are being ignored, a think tank has said.

Prime minister Sir Keir Starmer has faced pressure, including from some of his own Labour MPs, since being elected in July to scrap the controversial Conservative policy but has insisted he cannot do so in the current economic climate.

The New Economics Foundation (NEF) said its UK-wide analysis suggests that retaining both the two-child limit and the benefit cap – which a number of campaigners have said should also be axed – could see almost half (49.4%) of families with three or more children living in relative poverty after housing costs by the end of this Parliament five years from now.

Scrapping both from April 2025 could cost the Government £2.5 billion a year, rising to £3.5 billion by 2029/30, the organisation said.

Much of these costs are taken up by the two-child limit at £1.9 billion and £2.6 billion respectively, the NEF said, but it argued this would be “significantly offset by short, medium and longer-term economic gains”.

Chancellor Rachel Reeves will deliver Labour’s first Budget on Wednesday 30 October.

Each year, the chancellor of the exchequer - who is in charge of the government’s finances - makes a Budget statement to MPs.

The speech outlines the government’s plans for spending and taxes.

The Budget speech usually starts around 12:30pm and lasts about an hour. The Independent will be bringing you all the latest updates on the big day.

Ms Reeves may be considering pushing the freeze beyond its current expiry date of 2028 in a move that could raise £7 billion, according to the Financial Times.

Other measures reported to be under consideration include increasing employers’ national insurance contributions, raising fuel duty for the first time since 2010, changes to rules on inheritance tax and stamp duty, and a levy on e-cigarettes, according to reports across the media.

The Treasury has so far declined to comment on Budget speculation.

Wes Streeting has refused to rule out that the Government will freeze income tax thresholds in the upcoming Budget.

Mr Streeting had previously voted against the measure in opposition while Rishi Sunak was prime minister.

Speaking on Sunday Morning With Trevor Phillips on Sky News, Mr Streeting said: “I’m not going to speculate on what the Chancellor might do in the Budget.

“If you’re asking me whether I would vote against anything in the Chancellor’s Budget? The answer is no, of course I’m not going to do that.”

He went on to say: “This country is paying a heavy price for Conservative failure, and we’re going to have to make some big and difficult choices in this Budget to make sure we fix the foundations of the economy and we don’t end up back here.”

He later added: “What we’re not going to do is duck the difficult decisions, have Government by gimmick, short-term sticking plasters, because that is exactly how we ended up in this situation.”

In its election manifesto, Labour said it was committed to reforming the current business rates system “so we can raise the same revenue but in a fairer way”.

What this means has not been spelt out by the party, but it said the new system will be designed to “level the playing field between the high street and online giants, better incentivise investment, tackle empty properties and support entrepreneurship”.

It’s thought this could take the form of an immediate cut to the rates, while also closing loopholes which allow some firms to avoid tax. This will come as welcome news to smaller business owners, but Labour will be careful to ensure their reform maintains a monetary net zero.

Exchequer secretary James Murray MP confirmed this at a Labour conference fringe event hosted by the British Retail Consortium, saying: “It’s within the current envelope. It’s all about raising the same amount of money overall, that’s the commitment.”