Labour weighs new tax and spending plans for November budget

Labour ministers are facing mounting fiscal challenges in the run-up to the highly-anticipated November budget, with Chancellor Rachel Reeves reportedly considering over one hundred separate tax and spending measures to address a £30 billion hole in the public finances. The burden of potential new tax rises is expected to fall on higher earners, as Labour seeks to honour its manifesto pledge to protect those on modest incomes.

Transport Secretary Heidi Alexander has reiterated the government’s commitment to supporting hard-working Britons, defining a working person as anyone who rises each morning to earn a living, regardless of whether they are salaried or self-employed. She emphasised Labour’s goal to see living standards improve and to ensure broader access to high-quality public services, signalling these themes would be central to the forthcoming budget.

Treasury sources indicate Reeves has given orders to spare the lower two-thirds of earners from tax increases, focusing attention on the top third, reportedly those earning over £45000 annually. Raising income tax for this group is among the most effective options said to be under review, but it would mean breaking a key Labour election promise not to increase income tax, National Insurance or VAT for working people.

John Healey, Defence Secretary, declined to repeat previous pledges on not raising key taxes, highlighting the profound economic scarring from recent years of low growth, public sector cuts and the aftereffects of the pandemic. He warned the Office for Budget Responsibility’s latest forecasts were more pessimistic than before, necessitating tough decisions and new fiscal measures.

Alternatives to income tax rises reportedly being assessed include new higher council tax bands, increased capital gains taxes on investments, tougher restrictions on vehicles for certain benefits claimants and a proposed 20 per cent exit tax on the business assets of wealthy individuals relocating to tax havens. Sources say these options are still being negotiated, with no final decisions until the OBR completes its forecasts and the government weighs the best path forward.

New analysis by the TaxPayers’ Alliance casts a stark light on the long-term tax burden facing British households. Their figures suggest the average household will pay almost £600k in income tax across a lifetime, with a total tax contribution of over £1.2 million once all forms of taxation are included. The pressure is mounting on Chancellor Reeves not only to address the budget shortfall but also to avoid what the group describes as a devastating raid on household finances.