On Wednesday, Britain’s new finance minister, Rachel Reeves, is expected to unveil one of the most substantial tax hikes in over 30 years. The tax measures aim to fund improvements in public
services alongside billions in additional borrowing to stimulate economic transformation.
In its first budget after 14 years of Conservative rule, the Labour government hopes to fulfill campaign promises without sparking the kind of bond market instability that brought down former Prime Minister Liz Truss in 2022.
Labour has pledged to tackle long waiting lists in the National Health Service, increase housing availability, and invest in schools. “It falls to this Labour Party, this Labour government, to rebuild Britain once again,” Reeves stated in a preview of her speech shared with the media on Tuesday.
Four months after taking office, Prime Minister Keir Starmer has indicated that "those with the broadest shoulders" will bear a heavier tax burden under the new budget, which Reeves is set to present in Parliament around 12:30 GMT.
Reeves has argued that her predecessor left a £22 billion gap in public finances—a claim rejected by the previous finance minister, Jeremy Hunt. As part of the new fiscal plan, businesses will likely face higher social security costs. Combined with policies like enhanced worker protections and a raised minimum wage, these measures could challenge Labour’s ambitions to make the UK the fastest-growing economy in the G7.
A recent report by polling firm Savanta shows that business optimism reached a low in October, echoing similar trends in consumer confidence since Labour took office in July. "Keir Starmer and Rachel Reeves will likely be concerned about how quickly years of goodwill among businesses appear to have dissipated," commented Matt McGinn, a consultant at Savanta.
The budget is also expected to target the wealthiest Britons, with higher taxes on capital gains, dividends, inheritances, and overseas-held assets, further increasing the country’s tax burden, which is already at its highest since the post-World War Two period.
According to government sources, Reeves is expected to announce about £40 billion ($52 billion) in fiscal adjustments, predominantly from tax increases, to fulfill her commitment to fund routine government spending. The Institute for Fiscal Studies (IFS) reports that this tax hike—representing about 1.25% of the UK’s GDP—would be one of the most significant in recent history, second only to a Conservative budget in 1993, which implemented similar measures to stabilize public finances after a recession and currency crisis.