Reeves pushes relief measures while preparing new taxes to cover a vast funding gap

Chancellor Rachel Reeves will deliver a crucial budget that aims to ease the intense cost of living pressure facing households while confronting a shortfall of about twenty billion pounds in public finances. The fiscal statement is expected to define the direction of the government as it attempts to restore stability, address weak growth forecasts and reassure increasingly anxious Labour MPs.

Reeves plans to outline a series of measures intended to support workers and improve living standards. A central feature of the budget is a rise in the national living wage, which will increase to twelve pounds and seventy one pence from April for people aged twenty one and over. This increase represents an uplift of more than four per cent and is expected to raise the annual income of roughly two point four million workers by about nine hundred pounds. Younger employees aged between eighteen and twenty will also receive an increase, with their minimum hourly rate set to rise to ten pounds and eighty five pence. The intention is to narrow the difference between the earnings of younger and older workers and ensure pay growth across all age groups.

The budget will also include the first freeze of regulated rail fares in three decades. Commuters who rely on season tickets, peak time journeys or off peak returns between major cities are expected to benefit from this intervention. The Treasury believes the freeze will ease pressure on working families and support wider efforts to control inflation. In addition, the government intends to cut environmental levies on energy bills to reduce household costs and will remove the two child benefit limit in an attempt to improve support for low income families.

To fund these commitments, Reeves is preparing a broad set of revenue raising measures. The government has already abandoned plans for an income tax rate rise and will instead continue the freeze on income tax thresholds for at least two more years. This approach is expected to raise billions through fiscal drag as wages rise while thresholds remain fixed. Further measures include limits on salary sacrifice schemes, the introduction of a gambling levy, a payment per mile system for electric vehicle use and a property tax focused on high value homes. These additional sources of revenue are intended to close the gap without resorting to more dramatic tax increases.

However, concerns are rising among Labour MPs over the nature of the adjustments. Some argue that the combination of revenue changes may place a heavier burden on ordinary families at a time when living costs remain high. Others are uneasy about the political consequences of a budget shaped by a mixture of rising wages, frozen fares and more obscure tax increases that may not be fully understood until after the measures take effect. The build up to the announcement has been marked by leaks and speculation, much of it coming from ministers as the government attempted to prepare the public and avoid a negative reaction from financial markets.

Reeves will tell MPs that the government will not return the country to austerity and will avoid a loss of control over public spending. She is expected to describe the budget as a set of fair and necessary choices that will allow the government to invest in roads, rail, energy, housing, defence, education and skills. She will insist that the plan will reduce hospital waiting lists, support families and push forward what she calls the most ambitious growth drive in a generation.

Despite these assurances, the budget is likely to contain tough spending decisions. The chancellor is expected to revise long term departmental spending plans from an average rise of one per cent to about half that amount at the end of the parliament. This adjustment could lead to cuts in areas that are not protected, including local government, the justice system and border control. Analysts warn that these cuts may test the government’s ability to maintain services while meeting its fiscal targets.

The impact of the budget will depend on how effectively Reeves balances support for families with the need to rebuild confidence in the public finances. The government faces intense scrutiny as it attempts to manage rising costs, economic uncertainty and internal political pressures. The coming days will reveal whether the strategy succeeds in restoring stability or deepens concerns within the public and the markets.