Rachel Reeves Unveils Plans for Targeted Budget Action on Cost of Living

Chancellor of the Exchequer Rachel Reeves has announced plans for “targeted action” in the upcoming Budget, scheduled for November 27, 2023, aimed at assisting families grappling with rising living costs. Among the measures under consideration is a reduction of the 5% VAT rate on energy bills, alongside potential cuts to environmental levies that contribute to household energy costs.

In a statement made at the International Monetary Fund (IMF) on Thursday, Reeves emphasized the government’s commitment to addressing the cost of living crisis. “We know Brits are still struggling with the cost of living, and that is why we are determined to take action where we can, including reducing people’s energy bills,” a Treasury source confirmed.

The Chancellor’s remarks signal a proactive approach to financial challenges. She indicated that higher taxes on wealthier individuals would also be a significant aspect of her Budget announcement. Reeves stated, “Those with the broadest shoulders should pay their fair share of tax,” reinforcing her administration’s stance on wealth distribution.

Reeves has faced criticism for previous measures, including the introduction of VAT on private school fees and the elimination of the non-domiciled tax status for high earners. Responding to concerns over the financial implications of these policies, she referred to the skepticism surrounding her earlier Budget proposals. “Last year, when we announced things like the non-doms, like the tax increase for private equity, like the VAT on private school fees, there was so much bleating that it wasn’t going to raise the money—that people would leave,” she noted in an interview with The Guardian.

As the government prepares for the Budget, it faces substantial financial constraints, with estimates indicating a potential black hole in the public finances ranging from £20 billion to £30 billion. This gap presents a significant challenge for Reeves as she seeks to adhere to the government’s spending rules.

In light of these financial pressures, No 10 Downing Street reiterated that the government’s manifesto commitments remain intact, particularly the pledges not to raise VAT, income tax, or national insurance. The Prime Minister’s official spokesman acknowledged Reeves’ previous comments about increasing contributions from the wealthy, stating, “When asked, ‘should we expect to see more of that,’ she said that will be part of the story in the Budget, but we’ll be focusing on things that don’t impact on growth, because we need to unlock that economic growth for our economy.”

As the Budget date approaches, all eyes will be on Reeves to see how her proposed measures will balance the need for financial support for struggling families with the imperative of maintaining economic growth.