Rachel Reeves eyes £2bn levy on professionals as debt hits £2.9 trillion
Rachel Reeves was planning another tax raid on the middle classes last night – despite warnings she needs to cut state spending to prevent the economy from ’spiraling out of control’.
Surprising figures yesterday showed that families and businesses are paying record amounts of tax following the Chancellor’s first year in office.
They also revealed that even this is not enough to cover the cost of Labour’s significant expansion of the state, leading to Government borrowing reaching a record high outside of the pandemic, with the national debt reaching £2.9 trillion.
Last night, it emerged that the Chancellor is considering a £2 billion levy on middle-class professionals such as lawyers, accountants, and family doctors as she hurries to balance the books in next month’s Budget.
With inflation figures this morning expected to bring more gloom, Ms. Reeves yesterday conceded that the economy is ’not working as it should’ but attempted to blame Brexit.
Business Secretary Peter Kyle defended Labour’s spending surge, saying: ‘We are doing what it takes to invest our way out of the challenge we inherited from the Tory government.’
But Tory leader Kemi Badenoch said borrowing figures showed the economy was ’spiraling out of control’, while Shadow Chancellor Sir Mel Stride added: ‘If Rachel Reeves had a plan – or a backbone – she would stand up to her backbenchers, get spending under control, and cut the deficit.
’Instead, she is plotting to raise taxes yet again to pay for her failures.’
The Treasury did not dispute reports last night that she is considering a new charge on people who use limited liability partnerships as she tries to address a shortfall in the public finances estimated at £30 billion.
Almost 200,000 people who use partnerships do not pay employer’s national insurance.
Ending the system could generate £2 billion a year but would heavily impact thousands of well-paid middle-class professionals.
A solicitor earning the average £316,000 a year from a partnership would face an additional tax bill of £23,000.
Ms. Reeves is also considering further taxes on the affluent, including an annual levy on the most expensive homes or subjecting them to capital gains tax.
But a new report today urges her to focus instead on reducing spending.
The study by the Policy Exchange think-tank outlines plans to cut spending by £115 billion a year, including freezing benefits, reducing foreign aid, and ending the pension triple lock.
Figures from the Office for National Statistics yesterday showed tax receipts of £523.7 billion in the first six months of the fiscal year, £36.9 billion higher than the same period last year. But this record haul was overshadowed by £623.1 billion of spending.
The substantial gap was filled by more borrowing – nearly £100 billion between April and September – pushing national debt to £2.9 trillion.
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