Britain raises taxes by more than $30 billion in tougher economic outlook

London: Rachel Reeves, Britain’s top economic official, announced a set of tax increases on Wednesday as she sought to shore up the country’s public finances in the face of a worsening economic outlook.

In her second annual budget, Reeves, the chancellor of the Exchequer, said that she would raise taxes by nearly 26 billion pounds ($34 billion) by 2030, mostly via personal income taxes. At the same time, higher spending over that period, particularly plans to expand welfare benefits to larger families, was expected to increase government borrowing compared with forecasts made earlier this year. However, overall borrowing will still decline over the next five years.

The details of the budget are usually revealed to lawmakers in Parliament. But on Wednesday, the Office for Budget Responsibility, the independent fiscal watchdog, released its analysis and forecasts based on the budget in error about half an hour before Reeves announced her policies to lawmakers.

The 200-page report revealed all the details of the tax and spending changes, which showed that the chancellor had stuck to her self-imposed fiscal rules on reducing debt and building a buffer against the limits she had set.

British government bonds and the value of the pound wavered after the report’s early release, before settling to trade roughly flat.

The watchdog cut its forecasts for economic growth. It said that annual growth would average 1.5% over the next five years, 0.3 percentage points slower than was projected in March. The downgrade was primarily because of expectations for lower productivity growth.

Once she stood up in Parliament to deliver the budget, Reeves said that the policies announced would increase investment in the economy and the National Health Service, while also cutting the cost of living.

“These are my choices,” Reeves said. “Not austerity. Not reckless borrowing. Not turning a blind eye to unfairness. My choice is a budget for fair taxes, strong public services and a stable economy.”

Despite a landslide election victory, Reeves and Prime Minister Keir Starmer have seen their approval ratings sink to record lows over the course of their 16 months in government. Reeves has faced a challenging economic environment — with slow growth, high debt, high interest rates and global economic upheaval — and she has struggled to win over voters and members of her own party, while also appeasing anxious bond investors.

Since taking office, Reeves has said that she was seeking to put Britain’s finances on a “firmer footing” and bring down debt levels. She has also prioritized funneling more money toward public services and capital investment projects. But these ambitious spending plans have been constrained by her own “ironclad” rules on reducing debt and promises to not raise certain taxes on working people.

The result has been a fiscal bind that has caught her between voters, the markets and rebellious members of her own party.