Budget details and their release date.
The UK is bracing for the first Labour Budget since 2008, scheduled for 30 October 2023, as Chancellor Rachel Reeves prepares to outline the government's economic plans[1]. The anticipated focus will be on raising revenues to address worsening public finances and economic challenges.
Key anticipated content includes potential tax increases on wealthier households and properties, such as hikes in inheritance tax and the end of the Capital Gains Tax (CGT) exemption on high-value primary residences[2][3][5]. These moves aim to plug the growing fiscal "black hole" caused by increased borrowing costs and weak economic growth.
However, the impact of these measures is expected to be significant but controversial. While higher taxes might shore up public finances and help fund public services, they risk further dampening economic growth by discouraging investment and hiring, as seen from prior increases such as employer National Insurance contributions. The Office for Budget Responsibility (OBR) and experts have warned that the UK is close to tax-to-GDP levels not seen since World War II, limiting the scope for further hikes without harming the economy[1][2][4].
Moreover, the government faces tough trade-offs between sticking to self-imposed fiscal rules, raising taxes, or cutting spending, all amid a stalling economy and rising unemployment[1][2][4]. Some households and businesses are nervous about the prospect of higher taxes, particularly capital gains tax, inheritance tax, and potential changes to retirement taxes.
Rachel Reeves has announced changes to the Budget framework, including the introduction of a 'fiscal lock' and the requirement for the Treasury to share immediate public spending pressures with the OBR[6]. The Finance Bill serves as a motion of confidence in the government, and failure to pass key measures could result in the government's collapse.
After each Budget statement, the Commons Treasury Select Committee scrutinizes it and provides a report[7]. Keir Starmer, upon winning the election, appointed Rachel Reeves as the UK's first female chancellor. Investors are offloading government debt amid concerns that the chancellor could prioritize fiscal stimulus over long-term sustainability.
The Budget is expected to contain measures that could include changes in capital gains tax rates, reduction of existing pension tax perks, and potential tax hikes. The Labour party has promised to retain the state pension triple lock, a measure which protects pensioners' income against the corrosive effects of inflation[4]. The state pension is expected to increase by 4.1% next year, equivalent to around £460 extra a year for recipients of the full new state pension[4].
Each year, the chancellor of the exchequer sets out the government's plans for the economy in a Budget statement. Reeves has also announced that departmental spending reviews will take place every two years with a minimum planning horizon of three years[6]. Gilt yields have been rising in recent weeks amid speculation that Reeves could change government borrowing rules to facilitate more investment in the UK economy[2].
In summary, the upcoming Labour Budget will likely focus on tax rises aimed at addressing fiscal challenges, but these measures could have significant impacts on economic growth and employment. The Budget statement will be closely scrutinized by the Commons Treasury Select Committee, and the Finance Bill will serve as a motion of confidence in the government.
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