Labour’s ‘good storm’ Budget TODAY: Chancellor set to drop £35bn ‘tax bomb’ raiding center class and companies for splurge on public sector pay and providers – as jittery markets drive up rates of interest on authorities debt mountain

Rachel Reeves will deliver a massive £35billion ‘tax bomb’ Budget that could define the Labour government today.

The Chancellor is set to mount one of the biggest raids in history when she gets to her feet in the Commons at 12.30pm. 

Businesses have warned of a ‘perfect storm’ with Ms Reeves expected to hike employers’ national insurance to raise tens of billions of pounds for the Treasury. Inheritance is also believed to be in the crosshairs, while the seven-year freeze on thresholds  is being extended dragging huge numbers deeper into the tax system. 

Ms Reeves will argue that the Tories left public services in tatters and more funding is essential – even though critics say much of the gap is down to bumper public sector pay deals she signed off.

The Chancellor is also tearing up fiscal rules to borrow up to £50billion more for big-ticket investment in infrastructure and equipment. Jittery markets have pushed up interest rates on the government’s debt mountain to the highest since June as they price in elevated risk of a crisis.

Chancellor Rachel Reeves is set to mount one of the biggest raids in history when she gets to her feet in the Commons at 12.30pm

Jittery markets have pushed up interest rates on the government’s debt mountain to the highest since June as they price in elevated risk of a crisis. Pictured, 10-year gilts yields this morning

Extraordinarily, despite the looming pain Ms Reeves pointed to a 6.7 per cent increase in the minimum wage to claim she is ‘putting pounds in people’s pockets’.   

In comments trailed overnight, she said: ‘The only way to drive economic growth is to invest, invest, invest.

‘There are no shortcuts. To deliver that investment we must restore economic stability.’

Ms Reeves will brief the Cabinet this morning before becoming the first woman in history to deliver a Budget.

She is confirming a loosening of the government’s fiscal rules which will enable her to borrow up to £50billion to spend on infrastructure projects and growth sectors like green energy.

However, ministers will be watching nervously for reaction in the City, where the government’s borrowing rate yesterday rose to the highest level since the election, leading to fears of mortgage rate rises.

Business are already up in arms over her decision to focus tax hikes on employers, including a £20billion hit to NICs.

Ministers have been arguing that does not breach the Labour manifesto vow not to raise the main rates of NICs, income tax or VAT because it will not appear on ‘payslips’. 

But the respected IFS think-tank has branded it a ‘straightforward breach’ while economists say the effect will simply be passed to Brits in lower wages and fewer jobs.

The CBI warned that the tax hike, coupled with a bumper increase in the minimum wage, would ‘make it increasingly difficult for firms to find the headroom to invest in the tech and innovation needed to boost productivity and deliver sustainable increases in wages’.

Alexandra Hall-Chen, of the Institute of Directors, said the minimum wage had risen nearly a third in two years.

‘This latest increase comes at the same time as proposed changes to employment rights and expected increase in employers’ national insurance,’ she said. 

‘Taken together this is something of a perfect storm for business.’ 

Investors are also set to be hit by an increase in capital gains tax. 

Despite Labour’s pledge to protect ‘working people’, most ordinary workers will also be hit by a decision to extend the six-year freeze in tax thresholds, potentially for two more years.

Rishi Sunak, whose response to the Budget will be his last big moment as Tory leader, said the expected rise in NI would be a clear breach of Labour’s manifesto.

Tory leadership contender Robert Jenrick said: ‘This Budget completes the biggest heist in modern political history. The Labour Party won power by lying to the British public about their plan to hike taxes.

‘Working people are going to suffer and our economic recovery will take a huge hit. No wonder the public don’t trust politicians.’

Ms Reeves will say that spending plans left behind by the last government amounted to a ‘fiscal fiction’ which would have led to a return to austerity.

Instead, she is expected to pour more cash into the NHS and other public services.

Last night she said the Budget could put Britain on the path to the ‘immense’ prize of higher growth and better public services.

She said the measures would ‘turn the page on low growth and will be the start of a new chapter towards making Britain better off. It will mean more pounds in people’s pockets, an NHS that is there when they need it, and businesses creating wealth and opportunity for all’.

But briefing the Cabinet on the outline of her Budget plans yesterday, she acknowledged she had had to make ‘tough choices’ on taxes, spending and welfare.