This was a Labour budget – it reminds us there can be a better Britain
This budget will be remembered for finally abolishing the monstrous two-child benefit cap. That’s what Labour budgets do, boosting the low-paid, taking from the well-off. Children always come first, as 450,000 will be released from poverty, more than in any budget before. The chancellor reeled off Labour’s too often ignored child-first priorities: universal nurseries from nine months, breakfast clubs, more free school meals, school libraries, a youth guarantee. No, not back to 2010, but it’s progress. This doesn’t totally restore Sure Start, but in Best Start we see the beginnings of its rebirth.
After four months of tortured U-turns, dithering and leaking that spooked markets and paralysed spending, here is a far better budget than doomster predictions. But there should have been a political rolling out of the red carpet in advance to announce a redder budget than expected. Those with least got most: £900 more per year for 2.4 million people on the minimum wage. Prescriptions and fuel duty are frozen, frozen rail fares will save commuters around £300 a year. Energy bills are eased by taking the green levies back to the Treasury. It was high time to restore a little justice by taxing properties worth more than £2m. But, yes, the freezing of income tax thresholds amounts to the income tax rise that was pledged against. May all other future chancellors learn from Rachel Reeves’s original great sin, binding herself in iron fiscal chains. Never again.
Labour’s enemies will of course ferociously tear all this apart. How the opposite benches howled down abolishing the benefit cap. Alas, this dissent is backed by a majority of the public, who think scroungers have babies-on-benefits. Not so – all evidence shows it has minimal effect on birth rate. But this is a country mainly nurtured through the years on mean-minded Toryism. A Labour government now and then, with Labour budgets, reminds us that there is a better Britain that can do good. Not enough, not brave or radical enough. I don’t know if this will help reverse Labour’s desperate political misfortunes, but it should at least remind people who have lost trust what Labour governments are for.
Guardian columnist
I’ll say it: this budget didn’t hit the rich hard enough
First and foremost, it is wrong to ask working people to contribute more through freezing income tax thresholds, while the wealthiest in society are broadly left untouched. In a country with such extraordinary levels of wealth at the very top, the government should be looking to those most able to contribute more, not turning to those who are already doing their part.
The additional council tax surcharge on homes worth more than £2m and higher rates on investment income show a limited willingness to move in the right direction. These steps are far too small to make any real impact on the levels of inequality we are expected to tolerate. This lack of ambition on taxing the super-rich does not meet the needs of the moment. Instead, it shifts yet more pressure on to everyone else.
If the government chooses to reverse course on today’s decisions, there is still time to create a tax system that works for everyone. What our country needs is determination, will and clarity of purpose from our political leaders to deliver an economy that works for all of us, not just people like me.
The members of Patriotic Millionaires and I will continue to push our government for ambitious economic reform. The UK cannot afford any further piecemeal approach to the economy. While an annual wealth tax is not a panacea, it signals the kind of change required to put people first and address deep-rooted inequality. There is still time in this parliament to achieve this.
Millionaire investor, lawyer and a member of Patriotic Millionaires
A ‘mansion tax’ sounds good, but it’s not the reform we need
Our housing system is a key driver of the gap between rich and poor in society. This is because council tax bands have not been recalibrated since 1991. Retaining this system reinforces regional inequality and ensures the most expensive homes are chronically undertaxed.
While increasing council tax on homes worth more than £2m is a small step in the right direction from this government, it lacks the ambition the country was promised. Genuine reform could be achieved by simply implementing proportional property tax, in which every home’s tax rate is set annually in line with its actual market value.
It is right that the wealthiest pay more, and it is right that unearned wealth via assets such as property is taxed appropriately, yet this watered-down “mansion tax” alone will raise only a tiny sum (£400m), and not before 2028. We need a wholesale re-evaluation of how all property is taxed. This will be foundational to rebalancing the housing system and raising public money, therefore today’s announcement is a deflection from the fundamental issue: our inherently regressive council tax system.
If this is a tax-raising budget guided by Labour values, why has it shied away from a widely accepted reform that would raise significant finance and address a key driver of inequality?
Unfortunately, this budget is emblematic of Labour’s parliament thus far: mired with missed opportunities. This government is clutching at straws because it lacks the courage to tax the wealthiest adequately, and the conviction to properly support the millions struggling to pay their rent and bills.
Urban sociologist and honorary fellow at the University of Liverpool
On tax, Reeves chose ad hoc revenue grabs over big changes
This may feel like a “big budget” of tax reforms, but that’s only because successive governments have done so little in the way of serious reform that we’ve forgotten what it looks like. Overall, the tax changes announced today are unlikely to move the needle on growth much one way or the other.
There is still no sense that the government has a vision for a good tax system, let alone a strategy for getting there. In this climate, the risk is that even moves in the right direction – such as on council tax – still come across as ad hoc revenue-grabs rather than principled efforts to make the tax system fairer and more efficient.
For a government that’s supposedly obsessed with growth, we seem no closer to the realisation that our broken tax system is part of the UK’s growth problem, and that major structural reforms – not just rate-changes or more bolt-ons – are needed to fix it.
A strategy for pro-growth tax reforms is already out there and ready to be picked up. Recently, authors from CenTax and eight other thinktanks from across the political spectrum declared agreement on the way ahead. It’s regrettable that this budget contains barely a hint of progress against any of the seven reform packages we proposed.
For instance, reforming capital gains tax to provide a pro-growth investment allowance, alongside equalising the rate with income tax. And abolition of stamp duty alongside a full reform of council tax.
Outside government, the need for serious tax reform is universally accepted and there is remarkable agreement over how to do it. We must turn our attention to the reasons why successive governments have failed to deliver, despite this consensus. It would be wise to start thinking about this now, because 10 weeks out from the next budget will be too late.
Director of the Centre for the Analysis of Taxation and associate professor at London School of Economics and Political Science Law School
Where’s the offer for young people?
For years now, young people have said they feel overlooked by the government’s spending priorities, and this budget is no exception. Announcements of an above-inflation 4.8% increase in the state pension have been paired with a £2,000 per year cap on national insurance-free salary sacrifice schemes for those saving for a pension. This is particularly unfair for middle-income young people, as their prudent financial planning is turned into another opportunity for a tax raid – and with fears that we are unlikely to see the same state pension as boomers when we retire, we will be even more dependent on these private pots. A freeze on tax thresholds becomes a tax-by-stealth. Even minimum wage increases for 18– to 20-year-olds are portended by the Resolution Foundation as driving unemployment, at a time when nearly a million young people are economically inactive.
Further, reforms to the Isa allowance for under-65s, with £8,000 of the £20,000 now designated for special stocks-and-shares Isa options, will surely restrict savings for the future. It is right to address the low rates of retail investment and encourage engagement with the stock market, but with young people having grown up under the shadow of the 2008 financial crisis and Covid, and with the threat of the AI bubble bursting, they should be able to commit the full amount to fixed-rate, low-risk accounts if they wish.
In the absence of offers for young people, the narrative that emerges is one of a broken social contract. Highly educated middle-earners and Henrys (high earners, not rich yet) ask where the promised reward of stability is after pursuing competitive degrees and intense jobs, while growing resentful at others they believe are getting a free ride (see the popular “Nicolas, 30 ans” meme). And if this golden ticket of education and work is false, then why not forgo it and try to get rich quick with crypto?
I believe in progressive taxation, and as a childless gen Z I am happy for my taxes to go to breakfast clubs and lifting the two-child benefit cap. But the lack of concessions for young workers is invariably driving some others to the right, who direct their angst towards recipients of welfare, social housing occupants, migrants and pensioners. Pensioner poverty is a real issue, yet the image of cruise-taking over-65s funded by the young dominates.
Assistant newsletter editor and writer at the Guardian
