UK's budget includes $52 billion in tax increases

LONDON, U.K.: The UK's new Treasury chief, Rachel Reeves, unveiled a budget that includes 40 billion pounds (US$52 billion) in tax hikes to address a deficit in public finances and fund under-resourced public services, marking a significant shift in the country's economic policy.

Reeves, in her budget address, announced changes to the UK's debt rules to allow for increased borrowing, emphasizing a commitment to "invest, invest, invest" in key areas. A substantial portion of the new funds-25 billion pounds-will go toward the National Health Service (NHS) to tackle extensive backlogs that have grown since the COVID-19 pandemic.

"The choices that I have made today are the right choices for our country," Reeves at the end of a statement that lasted almost 80 minutes. "To restore stability to our public finances. To protect working people. To fix our NHS. And to rebuild Britain."

The budget, which represents the Labour Party's first since returning to power, marks the biggest tax increase in over 30 years. The primary revenue source is a 1.2 percent rise in national insurance contributions paid by employers, projected to raise 25 billion pounds.

To soften the impact on smaller businesses, Reeves doubled the salary threshold for the new levy. Additional revenue will come from higher capital gains taxes, closing inheritance tax loopholes, and increasing taxes on private jet users and private school fees.

While the tax burden is set to reach a historic high of 38.3 percent of the UK's GDP by 2027-28, Reeves avoided changes to income tax or fuel taxes. She did, however, increase duties on most alcoholic drinks, with a slight reduction on draught beer and cider.

The increased revenue will fund several initiatives, including improvements to schools and compensation for victims of past government mishaps, such as the Post Office Horizon scandal. Reeves argued that these measures are essential to "fix the foundations" of an economy weakened by years of Conservative leadership.

The Labour government, led by Reeves and Prime Minister Keir Starmer, has argued that it inherited an economy in worse shape than anticipated and that increased taxes are necessary to reverse years of austerity.

The Conservative opposition criticized the budget, claiming it breaches Labour's campaign promises not to raise taxes on working people, arguing that higher employer taxes could lower wages.

Reeves' budget, which also included increased borrowing for major infrastructure projects, comes amid concerns over market reactions. While some early signs indicated slight increases in borrowing costs, Reeves has been cautious to avoid the market instability seen during Liz Truss's short-lived premiership, which faltered over unfunded tax cuts.