Britain’s minimum wage will rise by 6.7 per cent next year as expected, Rachel Reeves announced ahead of a budget with a multi-billion pound tax increase designed to springboard a decade of renewal for the country, The Guardian reports.
Insisting that raising the minimum wage to £12.21 was an important step in Labour’s plan to support low-paid people, the Chancellor also said she could spare working people from tax rises designed to plug a hole in the public finances and avoid a new wave of found public spending cuts.
Instead, Reeves‘ main source of revenue will be employers’ national insurance contributions – a decision she claims is in line with Labour’s manifesto promises.
After months of gloomy warnings about the economic legacy, the Chancellor is expected to give an upbeat view of the UK’s prospects as she seeks to use the Budget to draw a line under 14 years of Conservative rule and lay the foundations for faster economic growth.
Despite another warning that it will take time to clean up the mess left by the Tories, amid fears from Labour MPs that the public expects dramatic change, Reeves will say:
“My belief in Britain burns brighter than ever. And the prize on offer today is immense. More pounds in people’s pockets. An NHS that is there when you need it. An economy that is growing, creating wealth and opportunity for all. Because that is the only way to improve living standards.”
In a Budget expected to be the biggest tax rise in history, Reeves will say the extra revenue is needed to plug a hole in the public finances inherited from the Conservatives and avoid a new period of austerity.
Freeze on income tax credits
Labour said on Monday night that the budget would provide funding to cut hospital waiting lists – with an increase in the NHS budget of at least 4% – unlock affordable homes and new investment to rebuild schools.
The Times reported on Tuesday night that Reeves would also announce a £3bn increase in defence spending, but would not give a timeframe for the 2.5% of GDP target. In April, Keir Starmer said Labour wanted to increase the figure from 2.3% “as soon as resources allow.”
Despite speculation that the Treasury may extend the freeze on income tax credits and thresholds by two years to 2030, Reeves will say she is sticking to the party’s manifesto pledge that she will not raise income tax, VAT or national insurance for workers.
Starmer previously told his cabinet that “politics is about choice” and that the Chancellor’s budget would “protect the payrolls of working people.” The government is expected to continue the freeze on fuel duty but may refuse to extend the temporary 5p cut introduced during the cost of living crisis, which is due to end in March next year.
Minimum wage increase
In the budget, Reeves will announce changes to the methodology for assessing the national debt – a move that will allow an extra £50bn to be borrowed to improve the UK’s infrastructure, including transport and energy projects.
The minimum wage for workers aged 18 to 20 will rise from £8.60 to £10 an hour, an increase of more than 16 per cent and the biggest increase ever. It means the pay of those working full-time will increase by £2,500 next year after ministers said they should eventually be paid the same as more senior workers.
However, the increased rate is still below the £12.60 an hour calculated by the Living Wage Foundation and voluntarily paid by 15,000 UK employers.
