Transport Secretary Heidi Alexander has refuted suggestions that pre-Budget disclosures have negatively impacted the economy, responding to criticism that such speculation has “caused paralysis among businesses and consumers.”
In recent months, media outlets have extensively reported on potential tax increases, with the government purportedly considering various measures.
Former Bank of England chief economist Andy Haldane stated on the BBC’s Sunday with Laura Kuenssberg program that this was “the single biggest reason why [economic] growth has flatlined”.
In response, Alexander acknowledged the habitual speculation leading up to Budgets but affirmed the Chancellor’s clear articulation of priorities.
Chancellor Rachel Reeves is widely anticipated to introduce tax increases in her upcoming Budget on Wednesday to address a substantial shortfall in her spending plans.
Government ministers had strongly signaled intentions to raise income tax rates.
Unnamed government sources allegedly informed the media that Reeves was contemplating such a move, potentially breaching Labour’s pledge not to increase “the basic, higher or additional rates of income tax”.
However, last week, government sources indicated Reeves had reconsidered this approach due to more favorable economic forecasts.
Governments sometimes selectively release aspects of their Budget plans to the press, either to gauge public sentiment or to prepare markets and voters for upcoming measures.
Haldane characterized the months of speculation surrounding potential Budget measures as a “fiscal fandango”.
“That’s been costly for the economy,” he told the program.
“It’s caused paralysis among businesses and consumers.”
He argued that the Budget process was “too lengthy, too leaky, with real costs”.
Haldane acknowledged that similar “pantomime” had occurred under previous administrations, asserting that the “budgetary process has been degraded over many years”.
When questioned about the alleged economic damage caused by the leaks, Alexander responded, “People always speculate in advance of a Budget, and we have always said ‘wait until the Budget’.”
Defending the government’s strategy, she stated that the Budget process had unfolded “on shifting sands,” citing a downgrade to productivity forecasts and “a very challenging global economic environment.”
The Conservative Party has called for an inquiry into pre-Budget leaks, asserting that they have “real world consequences, including for financial markets.”
In a letter to the Treasury’s most senior civil servant, shadow chancellor Mel Stride wrote: “Either ministers have approved the widespread briefing of confidential information surrounding the Budget, or serious unauthorised leaks have occurred within your department.”
The Chancellor is expected to announce a series of smaller tax increases in her Budget, having stepped back from raising income tax rates.
However, the government has not discounted extending the freeze on income tax thresholds – the level at which individuals begin paying tax or are subject to higher rates.
The freeze implies that any salary increase would result in higher tax payments, potentially pushing more people into higher tax brackets or requiring them to pay income tax for the first time.
Reeves has also emphasized a focus on reducing the cost of living, with the government announcing that rail fares in England will be frozen next year for the first time in decades.
Other priorities outlined by the Chancellor include reducing NHS waiting lists and the national debt.
Meanwhile, she is also expected to scrap the two-child benefit cap, a restriction that limits parents to claiming universal credit or tax credits for their first two children.
Labour MPs have exerted pressure to abolish the cap, which was introduced under the Conservatives—a measure that could amount to over £3 billion, according to estimates from the Institute for Fiscal Studies think tank.
While declining to confirm the cap’s removal, Alexander emphasized that tackling child poverty was “in the DNA of the Labour Party.”
“One of the defining elements of this government for me is about what we can do to ensure that children’s chances in life aren’t determined by the size of their parents’ bank balance,” she added.
The Conservatives have argued against removing the cap, with Stride telling the BBC that it was “a matter of fairness” that parents receiving benefits should face similar financial considerations regarding family size as those who are not.
The shadow chancellor told Kuenssberg: “The big choice at this Budget now is does the chancellor have the backbone to control government spending, particularly in the area of welfare where some of those costs are spiralling out of control, take those tough choices and therefore not have to start putting up taxes again in areas that are going to damage the economy.”
However, Green Party leader Zack Polanski said scrapping the cap would be a “victory” and it was “outrageous that it’s taken the Labour government so long to do it”.
He called for the government to “tax the rich”, rather than hit “people out of work or working people who are working really hard while their wages aren’t going up”.
Labour MP John McDonnell, the former shadow chancellor, said he hoped Reeves would announce a “redistributive Budget”.
“That does mean that the heaviest weight should fall on the broadest shoulders,” he told The Westminster Hour on BBC Radio 4.
“That means tax rises for the wealthiest and for the corporations, and for those who are making massive profits at the moment.”
Asked about divisions within Labour, McDonnell said: “We can do what we want in terms of getting stuff through Parliament.
“Yet we seem to be hindered by a lack of direction and some elements of competence as well.”
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