Rachel Reeves is set to provide an update on the economic health of the country when she delivers her spring statement on Wednesday.
She’s under growing pressure as the latest data shows the economy flatlining – and her statement is likely to include big spending cuts and may include tax rises, which could depress economic activity further.
So what can we expect?
Income tax freeze
The chancellor could decide to extend the freeze on thresholds at which people start to pay different rates of income tax beyond the current freeze, due to end in April 2028.
This could raise about £7bn a year, investment bank Citi found, and is known as a stealth tax as it drags more people into paying higher tax as their pay goes up.
Business rates
Reeves promised to launch “a fairer business rates system” – but after reducing the relief rate for retail, hospitality, and leisure from 75% to 40% at the October budget, the industry is struggling further.
The government has been consulting with businesses to reform the current system, with the consultation closing this month, so there could be some help for those struggling – possibly increasing the relief rate from 40%.
Cash ISAs
The investment industry called on Reeves to reduce the £20,000 tax-free annual limit on cash ISAs to £4,000 to encourage more people to invest their savings in stocks and shares.
They said this would help reinvigorate the UK’s capital markets, but leading building societies – who stand to lose out – objected and said it would hurt cash ISA savers
The change has been mooted for the spring statement but could be held for the budget in the autumn.
Employers’ national insurance
The spring statement comes 11 days before the controversial 6 April rise in employers’ national insurance contributions, announced at the October budget.
Reeves could offer some relief via an increased employment allowance, or a higher threshold before employers’ national insurance becomes payable, and specific relief for the charity sector.
International aid
Reeves is expected to confirm details of how international aid funding will be reallocated to defence, after the PM said the UK’s defence spending will rise to 2.5% of GDP by 2027.
Defence
The chancellor is expected to announce £400m in spending on the government’s new UK Defence Investment body to “harness UK ingenuity and boost military technology”, The Mirror reports.
You can read more from political reporter Alix Culberton on the statement here…
