Rachel Reeves is set to unveil £15billion of benefits spending at Wednesday’s Budget – funded by a tax raid on “working people”.
The Chancellor opened the door to scrapping the two-child benefit cap last week, with reports she would commit to this emerging over the weekend.
She is set to frame the move – estimated to cost taxpayers £3billion per year – as a way to lift hundreds of thousands of children out of poverty.
Ms Reeves is then set to boost payouts for “working-age benefits” like Universal Credit, Personal Independence Payment (PIP) and child benefits up in line with inflation, or 3.8 per cent, from April.
That move is expected to cost as much as £6billion.
Then, Labour’s earlier U-turns on PIP reform and winter fuel payments are expected cost the Exchequer a combined £6.25billion – which, added to the prior two, will add a total of £15.25bn to the benefits bill.
But at the same time, the Chancellor is said to be preparing to freeze inome tax thresholds – which could force nine million working Britons into paying more.
Labour’s manifesto had included an explicit promise not to raise taxes on working people.
Rachel Reeves is set to unveil £15billion of benefits spending at Wednesday’s Budget
|
PA
One option revealed to have been under consideration just days ago was slashing tax thresholds while leaving the headline basic and higher rates of income tax unchanged.
Ms Reeves had been set to extend a freeze on the thresholds – introduced by the Conservatives – by two years, which could raise as much as £10billion every year.
Cutting the personal tax thresholds, however, would raise billions of pounds more for the Treasury.
Alongside the freeze, various reports indicate a “mansion tax” on properties valued higher than £2million, a tax on gambling profits and a tax on bank profits will all be confirmed on November 26.
If Ms Reeves extends the threshold freeze, it could raise as much as £10billion for the Exchequer every year
|
GETTY
One minister told The Independent last night: “The ink definitely won’t dry on this Budget until Tuesday night but it looks like the PLP [parliamentary Labour Party] is getting what it wants… wealth taxes and an end to the child benefit cap.”
While writing in The Telegraph, Ms Reeves’s shadow counterpart Sir Mel Stride warned: “Instead of confronting the ballooning welfare budget, Labour is waving it through.
“And who will pick up the bill? Hard-working families.”
His words came amid fears the benefits splurge will leave the Treasury at the mercy of a potential market backlash.
Sir Mel Stride has previously said the Chancellor should resign from her post if she breaks her manifesto promise
|
GETTYAndy Haldane, the former chief economist at the Bank of England, urged the Chancellor to reassure markets after the last few months’ “fiscal fandango”.
Mr Haldane told the BBC: “”Financial markets do need to see some signs that this Government is capable of getting its arms around public spending. It really does.
“This is a vulnerable moment… The ground disappears beneath their feet in the financial markets. That is to be avoided at all costs.”
In the build-up to Wednesday’s Budget, the Treasury has refused to directly address speculation.
“The Chancellor will deliver a Budget that takes the fair choices to build strong foundations to secure Britain’s future,” a spokesman said.