Rachel Reeves has been accused of playing ‘silly games’ with tax and spending by the Institute for Fiscal Studies (IFS). The IFS director, Paul Johnson, criticized Reeves’ spending plans, stating that they involve a significant jump in spending next year followed by decreases in subsequent years. Johnson warned that this approach resembles the tactics used by previous governments to manipulate fiscal balances.
In response to the criticism, Rachel Reeves admitted that her £40bn tax-raising Budget could have a negative impact on wage growth for workers. She acknowledged that businesses may have to absorb some of the tax increases through reduced profits, leading to potentially lower wage increases for employees.
Despite the concerns raised by the IFS, the International Monetary Fund (IMF) supported the investment and spending on public services outlined in Reeves’ Budget, along with sustainable tax rises. This endorsement indicates a mixed reaction to the Chancellor’s proposals, with some experts expressing doubts while others offer their approval.
Treasury chief secretary, Darren Jones, engaged in a heated debate with BBC Newsnight’s Victoria Derbyshire regarding Labour’s tax hikes in the Budget. Jones defended Reeves’ decision to increase employer national insurance contributions, emphasizing the need for additional revenue to support government spending plans. Critics, however, warned that such tax changes could impact hiring, wages, and staff benefits in the UK.
Looking ahead, the Resolution Foundation highlighted the potential effects of Rachel Reeves’ Budget on UK workers’ pay packets. While there are positive aspects, such as a higher minimum wage increase for certain age groups, the overall outlook for real wages remains modest. The Foundation noted that by 2028, real wages are expected to have grown minimally over the past two decades, highlighting long-term challenges in wage growth.
In conclusion, Rachel Reeves’ Budget has sparked debates and discussions about its implications for tax, spending, and wage growth in the UK. While some experts criticize her approach as ‘silly games’, others express support for the investment in public services and tax reforms. As the government navigates these economic challenges, the impact on workers and businesses remains a central concern for policymakers and analysts.
