British Economy Minister Rachel Reeves announced tax increases on Wednesday to raise 40 billion pounds (nearly 50 billion euros), as part of the Labor government’s first state budget since its arrival to power in July. Reeves said the increases are essential to eliminate the £22 billion (€26.34 billion) budget deficit inherited from the Conservatives and to deliver on other previous unfunded promises.
Among these, he highlighted that he will allocate 11.8 billion pounds (14.124 million euros) to compensate the victims of a scandal in the 70s due to the contamination of blood transfusions and 1.8 billion pounds (2.155 million euros) to compensate hundreds of postmasters unfairly accused of fraud.
Regarding taxes, he announced that from April the social security contribution of companies would be increased from 13.8 to 15% – and that the salary threshold from which they would start paying it would be lowered – with which he hopes to ultimately raise 25 billion pounds. (nearly 30 billion euros) per year.
“Difficult but correct” decision
“It’s a difficult decision but it’s the right one,” said the minister, who announced that she would reduce taxes on commercial premises in the retail, leisure and tourism sectors by 40%. hotel industry, with a reduction in the tax on alcoholic beverages on tap. . Capital gains tax will also increase, from 10 to 18% in its lower bracket and from 20 to 24% in the upper bracket, although in the case of housing sales it will remain unchanged at current rates 18 and 24%.
“Despite this, (the capital gains tax) will continue to be the lowest of all the G7 European countries (the most developed economies),” he assured. The minister pledged to keep corporate tax at 25% this year and abolished the “non-domiciled” regime, which exempted millionaires with tax residency abroad from paying taxes in the Kingdom -United.
Will freeze the gas tax
Reeves said he would raise the rate on oil company profits to 38 percent but freeze the gas tax, one of the usually controversial points because it affects workers. The minister – the first woman to hold this position – stressed that with these decisions she is respecting her electoral promise not to increase taxes on “workers”, given that this will not affect income tax, neither their social security contributions nor those of additional people. value (VAT).
Among the new investments, it will devote 2.9 billion pounds (3.475 million euros) to the defense budget, in order to reach 2.5% of gross domestic product (GDP), with an additional 3.0 billion (3 .6 billion euros) of military support to Ukraine. The minister also confirmed that from April the national minimum wage for those aged over 20 will increase by 6.7%, from £11.44 to £12.21 per hour (13.76 to 14 .68 euros, at the current exchange rate), and from 8.6 to 12.21 pounds per hour. 10 pounds (10.34 to 12.03 euros) the hourly wage of young people between 18 and 20 years old.
Growth forecast of 1.1% for this year
The United Kingdom’s gross domestic product (GDP) will grow by 1.1% this year, compared to 0.1% in 2023, and 2% in 2025, according to forecasts published this Wednesday by the Minister for the Economy, Rachel Reeves , when presenting the Labor government’s first general budget to Parliament.
These estimates, made based on calculations by the Office for Budget Responsibility (OBR, which oversees the public accounts), also forecast growth of 1.8% for 2026, 1.5% for 2027, 1.5% for 2028 and 1.6% for 2029, improving those published the last time. March – under the previous conservative executive -, while the OBR envisaged an increase of 0.8% for 2024 and 1.9% for 2025.
In his speech to the House of Commons (bottom), Reeves also revealed that the OBR predicts that the UK inflation rate, which stood at 1.7% at the end of last September, will average this year 2, 5%, 2.6% in 2025, 2.3% in 2026, 2.1% in 2027, 2.1% in 2028 and 2% in 2029, target set by the Bank of England. Reeves announced new investments in defence, housing and education in the Labor government’s first budget, which includes tax increases to raise 40 billion pounds (nearly 50 billion euros).
It will spend £6.7 billion (more than €8 billion) on improving facilities and services in state schools, including free primary school breakfasts, an increase 19% compared to the previous year. The executive, which came to power in July, will also invest 5 billion pounds (nearly 6 billion euros) to support the construction of new affordable housing and will increase the defense budget by 2.9 billion pounds (3.475 million euros).
