Rachel Reeves has said the autumn budget was a one-off event that “wiped the slate clean” and would not need to be repeated.
Reeves announced on Wednesday that she would be increasing employer national insurance contributions by 1.2 percentage points to 15 per cent from April, generating £25 billion.
The Office for Budget Responsibility (OBR) warned the increase in national insurance contributions is likely to reduce wages and lead to job losses. Questioned on this point on Thursday morning, the chancellor admitted the tax hike will likely mean lower wage increases for workers.
The chancellor told BBC Breakfast: “I said that it will have consequences.
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“It will mean that businesses will have to absorb some of this through profits and it is likely to mean that wage increases might be slightly less than they otherwise would have been.
“But, overall, the Office of Budget Responsibility forecast that household incomes will increase during this parliament. That is a world away from the last parliament, which was the worst parliament ever for living standards.”
In total, Reeves outlined a £40 billion rise in taxes, making Labour’s first budget in almost fifteen years the biggest tax-raising budget since 1993.
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Other tax plans include increasing stamp duty on second homes by two percentage points to 5 per cent, the windfall tax on energy giants up to 38 per cent, the expected VAT on private school fees, and the air passenger duty rate for private jets to 50 per cent.
In terms of spending, the chancellor confirmed the NHS will receive a significant boost of £22.6 billion in day-to-day spending and £3.1 billion for its capital budget this year and next.
There was also billions more for the devolved governments, money to rebuild schools and compensate victims of the infected blood and Horizon scandals, a £3 billion boost in defence spending, and £5 billion for new homes, and the already announced rise in the minimum wage.
In full, the announcements prompted a furious response from Rishi Sunak, the outgoing Conservative leader, who accused Labour of broken promises.
Speaking elsewhere on Thursday as she defended her measures, Reeves insisted that the budget was a one-off fiscal event that would not need to be repeated.
She said that “as a result of what we have done we are not going to have to come back and ever do a Budget like this again”.
The chancellor told Sky News: “This was a budget that fixed the foundations and wiped the slate clean. It was a big budget, it was a significant budget but we have now brought out into the open things that were covered up by the previous government and swept under the carpet.
“Because of the action that we took yesterday our public finances are now on a firm footing.
“The debt and the deficit are now more sustainable and on a stable path and so as a result of what we have done we are not going to have to come back and ever do a budget like this again because we have brought everything out into the open.”
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