In a recent interview with the Observer, Chancellor Rachel Reeves outlined her plans for a transformative budget aimed at revitalizing public and private investment in hospitals, schools, transport, and energy. As we approach the first budget presented by a female chancellor, Reeves draws parallels with historical Labour reform initiatives, referencing the significant efforts of Clement Attlee in 1945, Harold Wilson in 1964, and Tony Blair in 1997.
“This marks only the fourth time Labour has progressed from opposition to government,” Reeves noted. “In 1945, we rebuilt after the war; in 1964, we embraced the ‘white heat of technology’; and by 1997, we focused on revitalizing our public services. Now, it’s time to do all of that again.”
However, Reeves is likely to face backlash over her upcoming announcement of £40 billion in tax increases and spending cuts. This will include raising employer national insurance contributions (NICs) by up to 2% and potentially freezing income tax thresholds beyond 2028, a move critics argue contradicts Labour’s election pledges.
Reeves insists that her approach remains consistent with campaign commitments. “Immediately after the budget, people won’t see their main taxes—income tax, national insurance, or VAT—going up,” she emphasized. “We promised not to raise those taxes on working people.”
Acknowledging the challenges ahead, Reeves stated, “A lack of adherence to manifesto commitments has eroded trust in politicians. We don’t aim to be that kind of government, and I don’t want to be that type of chancellor.”
Opposition figures, including Shadow Chancellor Jeremy Hunt, have slammed the plan, arguing that raising NICs amounts to a “jobs tax” which would negatively impact employment and wages, asserting it represents a breach of previous promises as highlighted by the Institute for Fiscal Studies.
Despite the inevitable pushback regarding tax increases, Reeves is committed to framing the budget as the inception of a significant “national renewal” aimed at rectifying the financial chaos left by the previous government. This includes addressing a £22 billion shortfall in current spending while redefining fiscal rules to facilitate an additional £50 billion in borrowing for capital projects meant to revive deteriorating public infrastructure.
Reeves intends to earmark £1.4 billion specifically for the reconstruction of concerning school facilities, pledging that 50 schools will be rebuilt annually, alongside new hospital projects. She stressed that these initiatives hinge on favorable changes to fiscal rules, expressing her expectation that the Conservatives would oppose these alterations post-budget.
Positioning herself for a strategic political debate, she remarked, “Should they oppose our new fiscal rules, they would effectively be endorsing the current decline. We’re ready to engage in that discussion, and we believe we hold the moral high ground.”
Reeves also articulated her vision for two essential types of investment: one that encourages substantial private sector involvement alongside public funding and another concentrated on urgent public sector needs like hospitals and schools. “The objective is to unleash investment, public and private, enabling our country to achieve remarkable outcomes once more,” she added.
On the topic of child poverty, Reeves acknowledged the limitations of not lifting the two-child benefit cap but affirmed her commitment to mitigating child poverty through other means. “We are a responsible Labour government, committed to lifting children out of poverty and revitalizing the National Health Service. I hope people recognize that we are beginning to effect positive change.”
