UK budget 2024 live: Rachel Reeves’ expected tax hike will hit workers, says ex-Bank of England governor
Education secretary Bridget Phillipson has vowed no tax rises in payslips for ‘working people’
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Rachel Reeves’ tax-hiking Budget will hit workers however Labour frame it, the former governor of the Bank of England has said.
Lord Mervyn King, who was head of the Bank of England for a decade until 2013, said that the debate around who Labour are classifying as a “working person” is “a terrible illusion”.
Speaking on Sky’s Sunday Morning with Trevor Phillips, Lord King said: “Taxes are paid by people, they’re not paid by companies or institutions, ultimately, they fall on the amount that people can spend, and you only can raise significant amounts of money by raising taxes on most people, however you care to define that, but it’s most people will have to pay higher taxes.”
He added: “Ultimately, the impact of these higher taxes has to be on the consumption of most people, however you care to define that group.”
It comes after education secretary Bridget Phillipson pledged that working people would not see higher taxes on their payslips.
We’ll be bringing you all the latest updates ahead of the big event here, on The Independent’s liveblog.
ICYMI: Rachel Reeves boosted by big drop in inflation as she seeks £40bn in Budget tax rises
Rachel Reeves has been boosted by a sharp drop in inflation as she seeks to find £40bn of tax hikes and spending cuts in this month’s Budget.
The chancellor will welcome the dip, which saw inflation fall under the Bank of England’s 2 per cent target for the first time in more than three years, as she prepares for what promises to be a brutal Budget.
Rachel Reeves boosted by big drop in inflation as she seeks £40bn in Budget tax rises
The fall in inflation comes as Rachel Reeves looks for £40bn of spending cuts and tax hikes in the October 30 Budget
Budget rumours: Taxing pension savings
Pension tax relief is a reduction of the amount of tax paid on private pensions. It helps workers save for retirement by boosting their pension pots.
The amount of tax relief a person is granted is based on their income tax. It will effectively cancel out tax on pension contributions up to a maximum of £60,000.
After this, contributions will be taxed at either 20, 40, or 45 per cent, depending on which income tax rate the worker falls into.
However, the chancellor is thought to be considering a flat 30 per cent pension tax relief rate. This would mean that higher earners would effectively pay 10 per cent in tax, while those on the additional rate would pay 15.
The measure would raise around £3 billion a year, with 7 million earners paying more tax. But it would be better news for basic rate earners, who would actually begin to receive a 10 per cent boost to their pension contributions.
Evaluating the idea last year, the IFS said it would “redistribute the burden of taxation from the bottom 80 per cent to the top 20 per cent of earners.”
ICYMI: Millionaires urge Reeves to raise £14bn from capital gains tax changes at Budget
Rachel Reeves should increase capital gains tax (CGT) at Labour’s upcoming Budget, a group of millionaire business owners have urged, estimating the measure would raise £14bn a year.
In a report by the IPPR think-tank, analysts have consulted with wealthy entrepreneurs who say higher CGT would not have stopped them from making investments in the UK.
Millionaires urge Reeves to raise £14bn from capital gains tax changes at Budget
Government analysis has previously all but ruled out the measures
Budget rumours: Capital Gains reform
Capital Gains Tax (CGT) is paid on the profit made when an asset which has increased in value is sold. It is applied to things like the sale of personal possessions worth more than £6,000 (apart from a car), property that’s not the seller’s main home, shares and business assets.
It is charged at 10 or 18 percent for basic rate taxpayers, and 20 or 24 for higher or additional rate earners. There is a tax-free allowance of £3,000.
There are several ways CGT could be changed. In the run-up to the election, the Lib Dems and Greens both said they would rethink the tax bands to be more similar to income tax, raising an estimated £5.2bn a year.
ICYMI: Wes Streeting warned inflation-busting NHS Budget deal will not be enough
Fears have been raised that Wes Streeting’s inflation-busting funding deal for the NHS will not be enough for him to pay for the reforms he wants to drive through.
Sources have told The Independent that the Department for Health and Social Care is set to get about 4 per cent – between £7bn and £8bn – as Mr Streeting confirmed that he has mostly agreed his settlement with chancellor Rachel Reeves. Inflation is currently running at 1.7 per cent.
Wes Streeting warned inflation busting NHS Budget deal will not be enough
Health experts urge the government to find more money to tackle waiting lists and improve NHS care
Could the chancellor introduce an ‘Amazon tax’?
The chancellor is reportedly considering a new ‘Amazon tax’ that would see business rates paid my online tech giants increased.
Industry sources understand that a consultation will be launched after Ms Reeves announces the Budget on 30 October. This means the plans may get a mention.
It comes after Labour wrote in its manifesto that it would reform the business rates system to “level the playing field between the high street and online giants.”
The manifesto added that the current system “disincentivises investment, creates uncertainty and places an undue burden on our high streets.”
Mayors in talks to soften local transport cuts – reports
Local mayors have reportedly engaged in a last-minute lobbying campaign to persuade the chancellor to soften potentially hundreds of millions in transport cuts.
There are fears bus, tube and tram projects in all 12 combined authorities represented by metro mayors could be at risk of underfunding. Following the local elections in May, 11 of these posts are held by Labour mayors.
“The mayors have been pushing back on the idea that their sustainable budgets should be cut, not least because many of them thought the money was guaranteed until 2027,” one official told The Guardian.
With the Budget only a week away, Ms Reeves will have already submitted her proposals to the Office for Budget Responsibility, making any last-minute changes unlikely.
The chancellor already made a substantial cut to rail infrastructure projects in July, when she announced the cancellation of the Tory-era Restoring Your Railways project alongside unveiling the £22bn shortfall in public spending:
The 36 rail projects at risk of being scrapped to plug Labour’s £22bn black hole
Exclusive: Transport secretary Louise Haigh – who previously criticised Rishi Sunak for the ‘great rail betrayal’ of HS2 – now finds herself wielding an axe over £85m worth of projects
What should I do with my savings ahead of the Budget?
Ahead of the Budget on 30 October, there has been fevered speculation about changes to pension savers’ tax allowances and other perks.
Reports that pensioners could have tax breaks cut or axed led to savers withdrawing chunks of their retirement pots ahead of Chancellor Rachel Reeves’s big announcement.
What should I do with my savings ahead of the Budget?
Reports that pensioners could have tax breaks cut or axed have led to savers withdrawing chunks of their retirement pots ahead of the chancellor’s announcement
UK economy to grow faster than thought in pre-Budget boost for Reeves
The UK economy will grow faster than previously thought as lower inflation and borrowing costs lead to a boost in business activity, a boost for chancellor Rachel Reeves as she aims to fix the nation’s finances.
The update from the International Monetary Fund also suggested that the fight against inflation and the cost of living crisis had “largely been won”.
UK economy to grow faster than thought in pre-Budget boost for Reeves
Only Spain was given a bigger economic upgrade by the IMF, making the UK the biggest beneficiary for extra growth in the G7 – although the US’s new growth rate of 2.8 per cent is higher
Jeremy Hunt “had a tough job” says Rachel Reeves
Chancellor Rachel Reeves has said she has a “good relationship” with her predecessor Jeremy Hunt.
“I may not be particularly impressed with the state of the public finances that he left me, but I do recognise that after Kwasi Kwarteng, he had a tough job to do as well,” she told BBC Radio 5 listeners.
She adds that if there were one person she could “pick up the phone to now” it would be Alistair Darling, who delivered Labour’s last budget in 2010.
The veteran politician died last year at the age of 70. He served in cabinet for 13 years under both Tony Blair and Gordon Brown, working as chancellor during the 2008 financial crisis.
“I hope that he would be proud of what I’m doing as the next Labour chancellor after him,” Ms Reeves said.
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