What's happened
Chancellor Rachel Reeves' recent Budget has sparked significant internal dissent within the Labour Party, despite initial public support. The Budget, which includes substantial tax increases and spending commitments, has raised concerns about its impact on economic growth and living standards, leading to fears of future austerity measures.
What's behind the headline?
Internal Dissent
- Labour MPs express deep concerns about the Budget's implications.
- Criticism centers on the stark contrast between the Office for Budget Responsibility's (OBR) forecasts and the government's claims.
Economic Implications
- The OBR downgraded growth forecasts, predicting a squeeze on living standards.
- Increased employer National Insurance contributions may lead to lower wage growth for workers.
Future Outlook
- Economists warn of potential further tax rises to maintain spending levels.
- The Budget's long-term sustainability is questioned, with fears of a return to austerity looming after 2026.
What the papers say
According to The Telegraph, internal backlash within the Labour Party is significant, with one veteran MP stating, "It’s been received very badly indeed within the Labour Party." The Institute for Fiscal Studies (IFS) has also raised alarms, suggesting that the planned spending increases may not hold, with director Paul Johnson stating, "1.3% a year overall would almost certainly mean real-terms cuts for some departments." Meanwhile, The Mirror highlights that while the Budget aims to reverse Tory cuts, it risks imposing a heavy tax burden on working people, with Johnson noting, "This is the decade of higher taxes." The Independent emphasizes that the OBR's downgraded growth forecasts could lead to a further squeeze on living standards, indicating that the Budget may not deliver the promised economic recovery.
How we got here
Rachel Reeves presented her first Budget on October 30, 2024, reversing previous spending cuts and implementing a £40 billion tax hike to fund public services. This marked a significant shift from the austerity measures of the prior government, aiming to address long-standing issues in public service funding.
Go deeper
- What are the main criticisms of the Budget?
- How will this Budget affect working people?
- What are the long-term implications of these tax increases?
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