Rachel Reeves to deliver tax-raising UK budget

Chancellor Rachel Reeves has pledged to make “fair and necessary choices” ahead of delivering a budget which is expected to include tax rises.

Despite speculation last month, Reeves is not expected to raise income tax but will instead confirm a series of smaller changes in a bid to raise extra revenue.

This includes an expansion of the sugar tax to cover a wider variety of products and reducing the threshold at which it is charged, as confirmed by UK health secretary Wes Streeting on Tuesday.

Other changes that may be announced include a tax on electric vehicles, the reduction of the amount of money that is tax-free in Individual Savings Accounts (ISAs), and a cap on the amount workers can put into their pensions without paying National Insurance.

The UK Government last night also confirmed it would increase the national living wage and national minimum wage from next April.

Workers aged 18-20 will be entitled to £10.85 per hour, while those aged 21 and over will get £12.71 per hour.

Ahead of her statement to parliament, Reeves said austerity, a “chaotic” Brexit and the pandemic had done more economic damage than expected.

But she said: “I will not return Britain back to austerity, nor will I lose control of public spending with reckless borrowing.

“I will take action to help families with the cost of living, cut hospital waiting lists, cut the national debt, and I will push ahead with the biggest drive for growth in a generation.”

She is also expected to announced changes to property and business taxes, though these will not directly impact Scotland as these are devolved.

The chancellor will get to her feet at approximately 12:30pm, immediately after Prime Minister’s Questions.

The contents of the budget have been the subject to a significant degree of speculation in recent months as Labour battles to balance the books without breaking manifesto commitments or Reeves’ self-imposed fiscal rules.

But this ongoing speculation has been damaging in itself, with rumours of a rebellion among Labour MPs if it does not land well and uncertainty in the markets.

A package of measures designed to support those struggling with high energy bills is also expected, while removal of the two-child benefit cap has also been rumoured.

Scottish Labour leader Anas Sarwar called for both measures earlier this week. He told the BBC’s Sunday Show: “We have to see the end of the two-child benefit cap, which would lift tens of thousands of children out of poverty. It has to be a budget that confronts the cost of living crisis and improves living standards. That's why we need a package to bring down energy bills.”

The Scottish Government will set its own budget in the new year, later the usual due to the UK budget being later.

Finance secretary Shona Robison has expressed concern about the lack of engagement due to the limited timeframe. She said: “Given the limited time to consider the implications of any major policy changes between the UK budget and the Scottish budget on 13 January, this lack of engagement is a particular concern. Last year, the UK Government increased employer National Insurance contributions without any consultation, which led to a funding shortfall of around £400m for public services in Scotland and acts as a tax on jobs.  We cannot see a repeat this year.”

She called on the UK Government to invest in public services and infrastructure.