UK Finance Minister Rachel Reeves outlines the October 2024 Budget | Wilnesh News

LONDON – British Finance Minister Rachel Reeves will unveil the government’s much-anticipated first budget on Wednesday, ending weeks of uncertainty over potential tax increases and spending cuts.

The fiscal announcement, Labour’s first for almost 15 years, prompted much speculation, with Chancellor Keir Starmer warning that his government was trying to plug a “black hole” in the public finances and making “painful” decisions. “decision. its broader pro-growth agenda.

Reeves clarified that on Thursday, confirming she would use the budget to announce a widely expected change to UK debt rules to free up billions of pounds for investment. However, she did not specify what investment rules would change.

“We will measure the debt differently. But, of course, we will put guardrails in place,” Reeves told Sky News on Thursday after the announcement was first made on Sky News. Financial Times.

Report It is suggested that the Treasury could target public sector net financial liabilities (PSNFL) rather than public sector net debt when measuring UK debt. The PSNFL indicator takes a broader look at the government’s balance sheet than public sector net debt, including financial assets and liabilities. The Treasury Department declined to comment on the proposals.

Goldman Sachs estimated in a report on Friday that the changes could increase the government’s fiscal space by about 50 billion pounds ($65 billion). Still, Goldman Sachs noted that the Treasury is unlikely to use all of the increases and that any increases would be phased in “over several years.”

“We believe the chancellor is unlikely to use all the resulting fiscal space and will instead leave greater room for debt rules,” Goldman Sachs said in a note.

As a result, Reeves is still expected to rely heavily on a series of tax reforms to fill what she calls ” £100bn spending gap ($129.6 billion) over the next five years. Here are the possible changes.

Starmer told Sky News last week that people Own shares It does not fall under his “definition” of working people. The Treasury Department later clarified that workers could own small amounts of stock.

The government has also not ruled out potential changes to National Insurance tax on employers’ pension contributions, which would result in business owners paying more to employ workers.

Reports suggest Reeves may extend his term Freeze personal income tax thresholds set by the previous Conservative government. While the policy does not raise overall income tax rates, it is often referred to as a “stealth tax” because it ultimately drags workers into paying more taxes as a pay increase moves them into a higher tax bracket.

Elsewhere, reforms to inheritance tax (IHT) and capital gains tax (CGT) remain under discussion as the government seeks to reduce wealth imbalances across the country. Although plans to impose new taxes on non-residents in the UK are likely to be watered down amid fears it will fail to raise revenue and instead trigger an outflow of wealth.

Analysts expressed mixed views on the expected measures, noting that Reeves has a delicate line to walk in balancing the books. Goldman Sachs estimated in a report on Friday that the government may need to raise 25 billion pounds a year to meet spending targets.

“Our main message is that Chancellor Reeves will try to deal with a range of strains on public finances to meet her twin objectives of avoiding real substantive cuts in non-protected spending and increasing public investment. Tax increases will be needed to help To achieve these goals, Investec said in a report on Thursday.

Duncan Edwards, chief executive of the Anglo-American Business Corporation, warned the government against excessive measures that could harm business.

“Raising taxes, raising the cost of doing business here, penalizing investment by raising capital gains taxes and so on, these all seem like strange ways to achieve a growth agenda,” Edwards told CNBC’s “Squawk Box Europe” on Friday. “

Reeves has been criticized for not publishing a budget ahead of Labor’s July 4 election, with critics saying the delay cast a cloud of uncertainty over the economy and business.

Latest data from GfK on Friday showed consumer confidence fell to its lowest level since March in October, when former chancellor Jeremy Hunt delivered his final budget. S&P Global Express showed on Thursday that business confidence also fell to an 11-month low this month.

Meanwhile, government borrowing costs rise sharply as memories of former Prime Minister Liz Truss’ disastrous September 2022 “Mini budget” continues to be the focus of attention. UK bond yields climbed after Reeves announced debt rules on Thursday, with the 10-year gilt yield hovering near a 16-week high of 4.24%. Still, analysts ruled out the possibility of a similar market crash.