UK budget 2024 live: Rachel Reeves’ expected tax hike will hit workers, says ex-Bank of England governor

Education Secretary Bridget Phillipson is on the media rounds this morning.

She has declined to say whether Labour’s pledge not to raise income tax, VAT or national insurance will remain in place for the next five years. However a government source has now been forced to clarify that the pledge covers the whole of this Parliament.

She also said that a working person in someone “whose main income arises from the fact that they go out to work every day”. There has been a lot of speculation about what Labour meant in their manifesto when they promised to not tax working people.

“What we’re talking about here is people whose main income arises from the fact that they go out to work every day,” the Education Secretary told Sky News’s Sunday Morning With Trevor Phillips programme.

Rachel Reeves has compared her mission in this week’s Budget to Labour’s historic reform programmes under Clement Attlee, Harold Wilson and Tony Blair.

In an interview with The Observer, she said: “This is only the fourth time that Labour has gone from opposition into government. In 1945, we rebuilt after the war; in 1964, we rebuilt with the white heat of technology; and in 1997, we rebuilt our public services. We need to do all of that now.

“This is a new settlement on Wednesday to rebuild our country and seize the massive opportunites in technology and energy that are out there.

“There is a global race on for those jobs and we need to seize them for Britain. If we can unlock that investment, public and private, then we can do great things as a country again.”

Rachel Reeves has said that she will launch a new era of public and private investment in hospitals, schools, transport and energy in her Budget.

In an interview with The Observer, Ms Reeves has said that Labour will change the fiscal rules to allow for £50bn of extra borrowing for capital projects.

£1.4bn has already been pledged to rebuild crumbling schools, but further measures for hospitals are expected to be announced.

She told the paper: “We inherited a plan from the previous government in which public sector net investment, capital investment, would be falling sharply over the course of this parliament, and that would mean scores of hospitals not built. It would mean massive opportunities to grow our economy in the digital and energy sector would be missed and those jobs would go elsewhere.”

Bridget Phillipson said the UK’s “best days are ahead of us” as she promised the Budget would seek to “invest in the long-term prosperity of our country”.

The Education secretary told Sky News’s Sunday Morning With Trevor Phillips programme: “We face some tough choices but we need to restore stability back to the economy.”

She added: “But the choice of this Budget is, ‘do we invest in the long-term prosperity of our country, or do we accept we’re on a path to decline?’

“I think our best days as a country are ahead of us, and this Budget will fix those foundations so that we can get our country back on track.”

Education secretary Bridget Phillipson says she “can’t speculate” on whether Labour’s pledge to not raise income tax, NI or VAT on “working people” will apply for the whole five years of this government. The pledge on working people is included in Labour’s manifesto – but without a timeframe.

Follow along this morning as we bring you everything from the Sunday morning political shows ahead of this week’s Labour Budget.

On top of what has been confirmed, here are a number of measures that are reportedly going to be in Labour’s first Budget this week:

National insurance hike for employers

The amount employers will pay in national insurance is reportedly set to rise in the Budget.

Reports have suggested it could be increased to up to two percentage points. It has been reported that the raise would be used in part to fund the NHS.

Ms Reeves will also make a cut to the earnings threshold at which employers start making national insurance contributions, The Times has reported. Both measures are expected to raise £20bn.

Continued freeze on income tax thresholds

A continued freeze on income tax thresholds beyond 2028 has been floated ahead of the Budget. Government sources have insisted it would not be a breach of Labour’s election promise to not tax working people.

A threshold freeze would allow Ms Reeves to raise an estimated £7bn by bringing more people into the tax system.

Capital gains tax on shares

Rachel Reeves will reportedly use her Budget to increase capital gains tax on the sale of shares.

However the rates will not change for selling second homes, The Times reported.

Capital gains on profits from the sale of shares, which is currently levied at a higher rate of 20 per cent, is reportedly going to rise by several percentage points.

What has been trailed so far from Wednesday’s Budget:

Slash Right to Buy discount

Rachel Reeves is to slash Right to Buy discount given to those purchasing their council house. The move is designed to protect existing stock so thousands more homes remain for rent.

£500m boost for social homes

An extra £500m for the current Affordable Homes Programme will see thousands more houses built. There will also me hundreds of millions of pounds invested in housing projects in Liverpool.

£1.4bn for schools and more childcare

£1.4bn will be set aside in the Budget to rebuild crumbling schools.

£1.8bn will also be allocated for the expansion of government-funded childcare, with a further £15m of capital funding for school-based nurseries.

Ms Reeves has also said she would triple investment in free breakfast clubs to £30m in 2025-26.

Chancellor Rachel Reeves has said next week’s Budget is “not going to be easy” but promised it will be a “Budget for the strivers”.

She admitted in an opinion article for The Sun on Sunday: “I will take the tough - but fair - decisions on tax”.

She added: “I have had to make tough decisions in this Budget. Not everything is going to be easy. But let me be clear - I am doing this for hardworking families up and down the country who have been crying out for change.”

Keir Starmer has denied misleading the public over tax rises in the Budget after he suggested “working people” did not make money from property or shares.

The prime minister also rejected claims he had waged a “war on middle Britain”.

At a press conference at the end of the Commonwealth heads of government meeting (Chogm) in Samoa on Saturday, the prime minister was asked whether he was “plotting a war on middle Britain”.

“No. Let me clear about that,” he said. “What we’re doing is two things in the Budget.

“The first is fixing the foundations, which is dealing with the inheritance that we’ve got, including the £22 billion black hole. We have to deal with that. In the past leaders have walked past those problems, created fictions, and I’m not prepared to do that.”

Asked whether he had misled the public in the Labour manifesto, he added: “No, we were very clear about the tax rises that we would necessarily have to make, whatever the circumstances, and you’ve listed them there, and I listed them, I don’t know how many times in the campaign.

“We were equally clear in the manifesto and in the campaign that we wouldn’t be increasing taxes on working people, and spelt out what we meant by that in terms of income tax, in terms of NICs [National Insurance contributions] and in terms of VAT and we intend to keep the promises that we made in our manifesto.”

New research by the Joseph Rowntree Foundation ahead of next week’s Budget shows the ongoing “black hole” in family finances, particularly affecting the poorest families, with many already £700 worse off than they were five years ago.

They are calling on the government to act on the findings and take action on hardship at the upcoming event.

Katie Schmuecker, Principal Policy Adviser at JRF, says: “The Budget on October 30th is not just a book-balancing exercise, it is a statement of political intent.

“The Labour manifesto described the need for emergency food parcels as a moral scar on our society, so it is inconceivable that there will not be a serious plan to protect families from hardship this winter and beyond.

“Last year Labour condemned the fact that 1 million children experienced destitution in a single year as a damning indictment of the Conservative government. A Labour government now has the power to take urgent action and people are looking to them to act.”