Rachel Reeves is set to extend a crackdown on benefit fraud, aiming to raise £1.2 billion to help balance the books in her upcoming Budget.
Alongside this, she is expected to scrap the two-child benefit cap, costing over £3 billion, and may raise taxes to bridge a multi-billion-pound spending gap.
The fraud initiative extends targeted case reviews for Universal Credit inaccuracies, projected to yield £1.2 billion by March 2031.
The Times also reports Ms Reeves may levy over 100,000 properties valued above £2 million, potentially raising £400-£450 million.
This would involve revaluing 2.4 million top-tier council tax properties, with payments deferrable until death or sale to prevent forced disposals.
Ms Reeves is grappling with weak economic growth, persistent inflation and an expected downgrade to official productivity forecasts as she prepares her statement.
After scrapping plans to raise income tax, she is expected to look to a “smorgasbord” of smaller measures to bring in cash.
She is thought to be considering bringing in a pay-per-mile tax for electric vehicle drivers and limiting how much workers can stash in their pensions under salary sacrifice schemes before paying national insurance.
And she will reaffirm the Government’s commitment to the triple lock on state pensions, and confirm that 13 million pensioners are set to benefit from an above-inflation rise next April.
An extension of the freeze on income tax thresholds is also among rumoured measures and would see more people dragged into paying tax for the first time or shifted into a higher rate as their wages go up.
Shadow chancellor Sir Mel Stride said Ms Reeves and Labour were choosing to increase the country’s welfare bill and passing the cost on to workers.
Writing in The Daily Telegraph, Sir Mel said: “Britain is in the grip of a cost-of-living crisis. People work harder, plan ahead and make tough choices daily.
“In such times, politicians owe them honesty not reckless promises or unfunded spending. Yet that is exactly what Labour looks set to deliver at the Budget: a multibillion-pound welfare splurge funded by stealth taxes on people who are already struggling.
“Central to that splurge is the expected scrapping of the two-child benefit cap. However, it is not only responsible – it is fair.
“Remarkably, the Conservatives are the only party who have come to that conclusion. Every other party is committed to scrap the cap – it’s only the Conservatives who want to control welfare spending.
“It is now clear that Labour will raise taxes to pay for this welfare expansion – possibly by extending the freeze on income tax and National Insurance thresholds.
“So, when taxes go up this week – when your pay packet shrinks – remember this is not because of global forces, or Brexit, or the Conservatives but because Labour has chosen higher welfare and is sending the bill to you.”
The Lib Dems have said the move would be “rank hypocrisy” and amount to a “stealth tax stitch-up” by Labour and the Conservatives.
They say extending it for two years will drag another 1.3 million into starting to pay income tax or into the higher rate, on top of 7.7 million already estimated to be hit under the Conservative freeze due to end in 2028.
Lib Dem deputy leader Daisy Cooper said: “A staggering nine million people are now set to be hit by the Conservative–Labour stealth tax stitch-up.”
She added: “Families across the country are fed up with being milked for their hard-earned cash.”
Helen Miller, director of the influential think tank the Institute for Fiscal Studies, said freezing the income tax threshold would “break the letter” of Labour’s manifesto.
“Assuming that it’s done the same way that it’s been done so far, it will also be a freeze in national insurance thresholds.
“It will therefore also be an increase in national insurance, and if so, in my mind, it would also break the letter of the manifesto, which said no increase in national insurance,” she told The Westminster Hour on BBC Radio 4.
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