Rachel Reeves is set to unveil Labour’s first Budget in a generation on Wednesday – and the first ever written by a female chancellor.
She has warned that it will involve "difficult decisions" – as she blamed the last Tory government for leaving a £22bn black hole in the public finances.
Paul Johnson, the director of the high-respected Institute for Fiscal Studies (IFS) think tank has already said it could be the “biggest tax-raising budget” ever and yet it still could leave “a lot of public services still feeling squeezed”.
Here we take a look at some of the key measures expected:
Tax rises
Ms Reeves is expected to raise employer national insurance payments. Labour has pledged before the election not to raise NI, but the party insists that applied only to employees, not employers.
However, critics have accused ministers of breaking their promises and planning to bring in a ‘tax on jobs’.
The chancellor is also thought to be planning to extend a freeze on the point at which people start paying income tax, or have to pay higher rates. Freezing the level means that over time inflation drives more and more people into paying higher rates.
Borrowing
The chancellor has changed her rules around debt, to allow her to invest in major projects. This is expected to give her up to an extra £50bn of borrowing to invest in infrastructure building such as roads, railways and hospitals.
Former Bank of England governor Mervyn King says extra borrowing could have an impact on interest rates. Asked on Sky News’s Sunday Morning With Trevor Phillips programme, he said: “Certainly if you borrow more, it doesn’t matter how you dress it up in terms of a different fiscal rule, people know that higher borrowing means higher borrowing, and financial markets and people who lend to the government will demand a slightly higher interest rate to compensate for the higher amount of debt that they’re being asked to finance.
“It doesn’t have to be dramatic, but it certainly will put some upward pressure on long-term interest rates. I don’t think it necessarily affects what the Bank of England does today or even next year, but it certainly will have some upward pressure.”
Inheritance Tax
One of the consistently most unpopular taxes, despite being paid by just four per cent of the population. Ministers are thought to be planning to raise money from the tax, possibly by making changes to a series of exemptions.
Fuel duty
Ministers are facing calls not to increase fuel duty, which has not risen in more than a decade.
Winter fuel payments
Ministers have announced plans to strip the payments from millions of pensioners by means-testing the benefit. But the move has prompted a backlash, amid warnings that some very poor pensioners are set to suffer this winter.
VAT on private schools
The government has announced plans to remove the exemption which saw private schools not have to pay 20 per cent VAT.
The change is due to come in in January. But Ms Reeves is expected to confirm that military families, who often have to move countries and homes, will be protected from the change in her Budget.
Education
Ms Reeves has said she will earmark £1.4 billion to rebuild crumbling schools as she pledges to prioritise education and childcare in the Budget.
There will also be another £1.8 billion to expand government-funded nursery care. Every child over nine months is to become eligible for 30 ‘free’ hours of childcare next September.
Health
Health secretary Wes Streeting is set to get an inflation-busting funding deal for the NHS.
Sources have told The Independent that the Department for Health and Social Care is set to get about four per cent – between £7bn and £8bn – while inflation is currently running at 1.7 per cent.
But with the health service in a terrible state, there are already concerns it will not be enough for him to drive through the reforms he wants.
