Nearly four months into office, the U.K.’s new Labour government presented its inaugural budget on Wednesday, introducing £40 billion ($51.8 billion) in tax increases to address public finance shortfalls and invest in essential public services.
One of the key revenue-raising measures will be an increase in National Insurance (NI) contributions from employers. British Finance Minister Rachel Reeves also announced hikes in capital gains tax, private school fees, and a freeze on fuel duty. Additional changes included a duty cut on draft alcohol and the abolishment of the controversial “non-dom” tax regime. In a move that surprised some, Reeves froze income tax and NI thresholds for workers, a step many view as a stealth tax.
Reeves reiterated her claim that Labour exposed a £22 billion “black hole” in the Conservative government’s previous budget, a figure the opposition party disputes. She also unveiled plans to generate £70 billion in investments through the newly established National Wealth Fund, the U.K.’s sovereign wealth fund.
In conjunction with the budget release, the Office for Budget Responsibility updated its U.K. economic outlook, forecasting real GDP growth to rise from nearly zero last year to 1.1% in 2024, 2% in 2025, and 1.8% in 2026—up from earlier predictions of 0.8% and 1.9% for 2024 and 2025, respectively.
The budget timing had drawn criticism, with some questioning the delay since Labour’s July 4 election victory, arguing it prolonged uncertainty for businesses and the economy.
