Rachel Reeves will clobber London in a multi-billion pound Budget tax raid with owners of expensive properties and millions of workers set to be hit.
However, more than 260,000 children in the capital will benefit from the lifting of the two-child cap under the Labour Chancellor’s new fiscal plan for Britain.
Hundreds of thousands of workers in London on the National Living Wage will get a pay boost next April.
But hospitality chiefs are warning that the NLW rise will cause more difficulties for many pubs, hotels, cafes and clubs already under huge financial pressure.
Ahead of delivering her Budget speech in the Commons on Wednesday, Ms Reeves said: “Today I will take the fair and necessary choices to deliver on our promise of change.
“I will not return Britain back to austerity, nor will I lose control of public spending with reckless borrowing.
“I will take action to help families with the cost of living, cut hospital waiting lists, cut the national debt.
“And I will push ahead with the biggest drive for growth in a generation.”
But shadow Chancellor Sir Mel Stride tore into the Labour Government’s tax and spend blueprint.
“Having already raised taxes by £40 billion, Reeves said she had wiped the slate clean, she wouldn't be coming back for more and it was now on her,” he said.
“A year later and she is set to break that promise.”
He stressed further: “This Budget isn't about economic necessity, it's about political weakness, and hardworking families are being handed the bill.”
Liberal Democrat London spokesman Luke Taylor, MP for Sutton and Cheam, added: “London’s families are seriously struggling with the cost of living, our businesses are buckling under higher NICs (National Insurance contributions) and post-Brexit red tape, and our housing crisis is the worst in the nation.
“So far the Chancellor hasn’t just failed to turn the ship around, she’s actively made things worse for Londoners.”
Ms Reeves delivers her second Budget amid growing tensions within Labour over Sir Keir Starmer’s leadership as support for the party is at a record low, according to some polls, including in London where it is on 32 per cent in the latest Savanta UK survey.
With the May local elections already looming on the political calendar, Sir Keir and Ms Reeves are under growing pressure to deliver economic growth, cut NHS waiting lists still at 7.4 million, and tackle the “small boats” crisis in the Channel.
Faced with having to plug a shortfall in the public finances of around £20 billion, the Chancellor was set to impose a new “mansion tax” on owners of expensive properties in a move which will please many of her party’s members and will impact hardest on London.
She was also due to drag millions more people, including 2.6 million in the capital and wider South East, into paying higher rates of income tax by extending the Tory six-year freeze on the thresholds for paying this levy by another two years.
Ms Reeves is raising the National Living Wage from next April by 4.1 per cent to £12.71 an hour for eligible workers aged 21 and over. The rate for 18 to 20-year-olds will increase by 8.5 per cent to £10.85 an hour, and for 16 to 17-year-olds by 6 per cent to £8.
Nearly 1.5 million children in England, including 260,000 in London, will also benefit from the lifting of the two-child cap, at an expected cost of around £3 billion.
In the capital, Newham, Hackney and Tower Hamlets will see the most children helped by the move which Ms Reeves previously opposed as she sought to balance Britain’s books.
But she has come under intense pressure from Labour MPs to end the cap, which leading economists say will lift 600,000 children out of poverty.
Tory MPs are accusing the Government of hiking taxes to spend billions more on welfare, having failed in its attempts to curb Britain’s ballooning benefits bill.
The Chancellor had been intending to break Labour’s flagship manifesto pledge on tax in order to slap 2p on income tax.
However, faced with a backlash from Cabinet ministers and backbench MPs, and after receiving better than expected forecasts on wage and tax growth according to Whitehall sources, she did a screeching U-turn and ditched the plan.
Instead, she has now opted for an array of new and higher taxes which economists have warned could backfire if the markets believe that she will struggle to raise the billions already pencilled in from the extra levies.
Measures expected in the Budget include a limit on pension salary sacrifice schemes, reducing the allowance for cash ISAs to encourage savers to put more money into shares, a new pay-per-mile levy for drivers of electric cars, cuts to energy bills, a gambling tax, restricting a salary sacrifice scheme for people to buy bikes, as well as increasing taxes on alcohol, tobacco and unhealthy food.
Businesses are expected to avoid the brunt of Ms Reeves’ tax raid after being hit in her first Budget with a £20 billion rise in National Insurance contributions by employers, widely blamed for undermining economic growth.
