Tax hikes, NHS and housing: What to expect from the Budget

The chancellor will deliver the Budget later today, billed as the most consequential since 2010

Rachel Reeves is set to unveil Labour's first Budget in a generation following weeks of speculation and reports around tax hikes and spending cuts.

It has been billed as the most consequential Budget since 2010, and Labour warns it has had to make "difficult decisions" to plug a £22 billion black hole it claims the Tories left in their wake.

Sir Keir Starmer has already confirmed tax rises are on the way, insisting on Monday that they are necessary to "prevent austerity and rebuild public services", while higher borrowing is needed for investment.

The government insists the hikes won't affect "working people", but confusion around the definition of a "working person" has prompted questions about whether Labour could break its own manifesto promise not to increase income tax, national insurance and VAT.

Some measures have already been confirmed, such as a £1 increase to the £2 bus fare cap, scrapping the VAT exemption for private schools, axing the winter fuel allowance, and raising the minimum wage by 6.7% to £12.21 per hour.

Here are some of the key measures to expect in Reeves' first budget - and the first ever written by a female chancellor.

Tax hikes and changes

- Employer national insurance contributions

Reeves is widely expected to increase employer national insurance (NI) contributions after she and the prime minister both signalled it could be on the cards.

ITV News understands the move is expected to be Labour's biggest revenue raiser, collecting just shy of £20 billion.

Labour committed not to raise NI during the election campaign but the party insists this applied to employees, rather than employers, and this hike will not be felt by "working people".

Businesses and charities have raised concerns about the impact this will have on employers already grappling with the cost of living crisis. The Federation of Small Businesses told ITV News it would amount to a "clear manifesto breach" that "will hit working people".

It is thought it could be raised by at least one percentage point.

Employers currently pay 13.8% on earnings above £175 a week, or £9,100 a year per person, under Class 1 NI contributions. It's deducted and set aside for HMRC before wages are paid out.

A one percentage point increase in the Class 1 rate could raise £8.45 billion over the 2025 to 2026 tax year, according to data compiled by HMRC and EY.

- Income tax

Reeves is also expected to extend the freeze on income tax thresholds, which sees people pulled into paying higher rates through a process known as “fiscal drag”.

The previous Conservative government froze thresholds until 2028 but it is thought the chancellor will extend it yet further.

- Fuel duty

The tax which is included in the price motorists pay for petrol at the pump could also be raised for the first time for more than a decade.

The tax on motor fuels was frozen by the Tories between 2010 and 2022, and then cut by 5p to 52.95p per litre, where it remains.

If the Labour government reversed the 5p cut they would raise around £2 billion.

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- Inheritance tax

Changes to inheritance tax has been touted as another way the government could find money to help balance the books.

According to reports, she could be considering changing some rules around inheritance tax, including extending the number of years someone has to stay alive after passing on wealth as a gift from seven to 10 years.

Currently, the number of people who pay inheritance tax is very small - last year only 5% of estates were charged an inheritance tax bill. There are also quite a lot of exemptions.

But a number of organisations have called on the chancellor to reform inheritance tax in order to get rid of some of the loopholes.

Health

Reeves has pledged the biggest capital budget for the NHS since 2010 - but experts say its impact may not be felt until next winter at the earliest.

Billions of pounds are to be pumped into the "broken" health service, which the government hopes will free up an extra two million NHS appointments each year.

The funding includes £1.5 billion for new surgical hubs and scanners and £70 million for radiotherapy machines.

An additional £1.8 billion has been allocated for elective appointments since July.

Health Secretary Wes Streeting has warned a "single Budget" cannot fix "14 years of damage done to the NHS" and that the extra money might not prevent avoidable deaths, as well as another winter crisis over the coming months.

He said: “We will start planning for next winter, this winter, to make sure we see continued, steady improvement in our NHS.

“And what this Budget will enable us to do is arrest the decline in the NHS and start fixing the foundation so we can not only get the NHS back on its feet, but make sure it’s fit for the future as part of our long-term plan.”

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Housing

The government has already confirmed a raft of measures to boost affordable housing.

It has pledged £500 million to help build 5,000 social housing properties, bringing the total investment in housing supply to £5 billion.

A further £128 million has already been confirmed for three projects to build homes.

Education and childcare

Some £1.4 billion has been announced already to rebuild crumbling schools.

There will also be a tripling of investment in free breakfast clubs, £1.8 billion for the expansion of government-funded childcare, and £44 million to support kinship and foster carers.

Another £15 million has been pledged for a new scheme placing nurseries in school classrooms. The first phase of the programme will see 300 new or expanded nurseries introduced in classrooms across England.

Debt rule changes

Reeves has already confirmed it will change the way debt is measured to open the door for the government to spend billions more on infrastructure, such as railways, roads, hospitals and new prisons.

She is expected to target public sector net financial liabilities (PSNFL) as her new measure of debt rather than the current yardstick of underlying public sector net debt.

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