Reeves will use tax rises and increased borrowing to ‘invest, invest, invest’

Rachel Reeves will raise taxes and increase borrowing as she promises to “invest, invest, invest” to “rebuild Britain”.

The UK’s first female chancellor will deliver the first Labour budget since Alistair Darling in 2010, promising to put “more pounds in people’s pockets”.

But commitments not to increase income tax or national insurance on employees are likely to see companies hit with a greater share of the burden to help repair the nation’s finances and fund stretched public services.

Changes to borrowing rules will also allow her to pump billions into renewing the UK’s infrastructure and could fund improvements to crumbling schools, hospitals and prisons.

Choices

The Chancellor said: “Politics is about choices. This Labour government chooses investment over decline.”

In the Commons, she will tell MPs: “My belief in Britain burns brighter than ever. And the prize on offer to today is immense.

“More pounds in people’s pockets. An NHS that is there when you need it. An economy that is growing, creating wealth and opportunity for all.

“Because that is the only way to improve living standards.

“And the only way to drive economic growth is to invest, invest, invest. There are no shortcuts. To deliver that investment we must restore economic stability.”

Prime Minister Sir Keir Starmer said: “This is a huge day for Britain. After 14 years of decline, we will invest in our country – rebuilding our schools, hospitals and roads.

“We won’t shy away from the tough decisions to grow our economy and protect working people’s payslips. There is a brighter future ahead.”

Hikes

Business leaders are nervously awaiting the Budget announcements, with increased levels of the national minimum wage and the prospect of hikes to employers’ national insurance contributions likely to add to labour costs.

A 6.7% increase in the national living wage will see it rise to £12.21 an hour next year.

John Foster, chief policy and campaigns officer at the Confederation of British Industry (CBI), said the national living wage was a “valuable tool” for protecting the incomes of the poorest in society “but with productivity stagnant, businesses will have to accommodate this increase against a challenging economic backdrop and growing pressure on their bottom line”.

“That pressure will make it increasingly difficult for firms to find the headroom to invest in the tech and innovation needed to boost productivity and deliver sustainable increases in wages.”

The CBI also warned that the expected increase in employers’ national insurance would have an impact on pay, hiring and investment.

Boost

Elsewhere in the Budget, the armed forces are in line for a £3 billion boost although this will largely be used to cover pay rises.

The funding will also be used to buy weapons, with the aim of replenishing stockpiles depleted by donations to Ukraine.

The Telegraph reported it will mean the proportion of national wealth spent on the military will decline slightly but remain roughly stable at 2.3% of gross domestic product (GDP) – Labour has pledged to increase it to 2.5% but has not set out a timetable for that.

Alongside its Budget analysis, fiscal watchdog the Office for Budget Responsibility (OBR) will publish a report on the Conservatives’ legacy in government, which is expected to account for the so-called £22 billion “black hole” in the public finances.

Shadow chancellor Jeremy Hunt is contesting the report, claiming in a letter to top civil servant Simon Case that the OBR risks “straying into political territory and failing to follow due process”.