On Wednesday, Britain’s new Labour government unveiled significant tax hikes and increased borrowing to support Prime Minister Keir Starmer’s vision of long-term growth. In the first fiscal update under the centre-left government after 14 years of Conservative rule, Finance Minister Rachel Reeves announced that tax increases would generate an additional £40 billion ($52 million).
During her hour-long speech to parliament, Reeves also confirmed changes to fiscal rules, allowing the government to invest billions more in public services. “This government was given a mandate,” Reeves told MPs. “To restore stability to our country and to begin a decade of national renewal. The only way to drive economic growth is to invest, invest, invest,” she emphasized.
Labour, which won a landslide general election in July, had already introduced several economic measures, including improved workers’ rights, higher minimum wages, a comprehensive green-energy plan, and mass housing projects. However, the budget faced criticism for scrapping a winter-fuel benefit scheme for millions of pensioners, affecting Starmer’s approval ratings.
Reeves stated that £25 billion would be raised by increasing employers’ national insurance, a payroll tax used to fund social care. As Reeves spoke, the pound regained some ground, while London’s stock market remained relatively stable. “At this stage, massive tax rises have not spooked financial markets,” said Kathleen Brooks, research director at traders XTB.
The government maintained its pledge not to raise income taxes, employee national insurance charges, or value-added tax. Outgoing Tory leader Rishi Sunak, Britain’s former prime minister, criticized the budget, calling it “broken promise after broken promise” and accusing the government of “delivering a tidal wave of anti-business regulations.”
