Rachel Reeves recently presented a budget full of tax hikes that are expected to impact working people. The Institute for Fiscal Studies (IFS) accused her of eroding trust in politicians by admitting that the tax increases would lead to workers receiving lower pay. The IFS director, Paul Johnson, criticized Reeves for claiming to protect workers while implementing measures that would not raise the expected revenue.
The Office for Budget Responsibility forecasted that the government’s spending measures would provide only a temporary boost to GDP, with downgrades expected in subsequent years. The Resolution Foundation also highlighted that real weekly wages were projected to grow minimally over the next decade. Despite the criticisms, Rachel Reeves defended her decision to increase employers’ national insurance contributions as a necessary step to address a significant hole in public finances.
Reeves’ budget included several tax hikes targeting the wealthy and middle class, such as raising employers’ national insurance contributions, increasing capital gains tax, abolishing non-dom status, expanding inheritance tax, and raising stamp duty. The tax experts warned about the potential consequences of these changes, including a high effective tax rate on inherited pensions.
The IFS emphasized that Britain was entering a decade of higher taxes, with state spending on the rise. While acknowledging the challenging situation faced by Rachel Reeves, the IFS criticized the lack of a coherent tax strategy and the failure to pursue major tax reforms. The IMF, on the other hand, supported the budget measures as a means to reduce the deficit sustainably and increase revenue over the medium term.
Overall, Rachel Reeves’ tax hikes have sparked debates and criticisms regarding their impact on working people, trust in politicians, and the need for a more comprehensive tax strategy to support economic growth. The budget decision is expected to have far-reaching effects on various sectors and individuals, highlighting the complexities of fiscal policy and public finance management in the current economic landscape.
