Poorest Brits to benefit most from major spending changes - but tax rises loom

Daily Mirror

2 days ago

The poorest Brits will benefit most from Rachel Reeves's public sector spending spree but tax rises look likely in the autumn, think tank the Resolution Foundation has said
The poorest Brits will benefit most from Rachel Reeves's public sector spending spree but tax rises look likely in the autumn, a leading think tank has said.
The Resolution Foundation said extra funding for hospitals, schools and police would be worth around £1,700 in provision for the worst-off fifth of families by 2028/29. It estimated that a middle-income household will gain £1,400 on average.
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But it warned that tight public finances and a weaker economic outlook could push the Chancellor into hiking taxes.
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In its Spending Review analysis, the thinktank said Britain is turning into a 'National Health State' - and health could account for half (49%) of all day-to-day public service spending controlled by Westminster by the end of the decade. This is up from a third (34%) in 2009/10.
READ MORE: Rachel Reeves pumps cash into NHS with 4million more tests and procedures to cut waits
While funding per person for health has increased by 36% over the decade, it has fallen by 16% for justice, 31% for the DWP, and 50% for Housing, Communities and Local Government.
On Wednesday the Chancellor turned on the spending taps with a £300billion package to renew Britain. It included £39billion for affordable housing and £29billion for the NHS.
Ms Reeves refused to rule out future tax hikes but said all the cash doled out in her Spending Review had been accounted for already in the Budget and Spring Statement. 'It would be very risky for a Chancellor to try and write future budgets in a world as uncertain as ours, but I won't have to repeat a Budget like the one I did last year,' she told LBC.
It comes as the Institute for Fiscal Studies said a "big chunk" of funding for local authorities in the Spending Review was coming from an assumption that council tax in England will rise by the maximum amount of just under 5% each year.
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Ms Reeves declined to rule out council tax rising by 5% every year. But she said local authorities did not have to increase tax by this figure. She also did not accept claims a 5% rise would be needed to boost police funding, saying the Government had increased the spending power of the police by 2.3% every year.
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Elsewhere, the Chancellor was also forced to reject the suggestion she was a "Klarna Chancellor" who had announced a "buy now, pay later" spending review. "I don't accept that at all," she said. "The idea that yesterday I racked up a bill that I'm going to need to pay for in the future, that's just not right.
Her comments come as the Office for National Statistics reported the economy shrank by 0.3% in April. It was the biggest monthly contraction since October 2023 and worse than the 0.1% fall most economists had expected.
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Ruth Curtice, chief executive of the Resolution Foundation, said without economic growth, another round of tax rises was likely to come in the autumn as the Chancellor seeks to balance the books.
She said: "The extra money in this spending review has already been accounted for in the last forecast. But a weaker economic outlook and the unfunded changes to winter fuel payments mean the Chancellor will likely need to look again at tax rises in the autumn."
Meanwhile, Kemi Badenoch yesterday criticised the Government for giving 'more and more money' to public services - but declined to say what she would do differently. "What we should be talking about is reform of public services. They're just giving more and more money,' she said.
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"This is a war on the private sector, where private businesses are having to cut their coat according to their cloth. Of course, we want to fund public services, but we need to make sure that we're doing things better."
But asked repeatedly to set out what the Government should stop doing, or whether she would reverse last year's rise in national insurance, Mrs Badenoch declined to answer.
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She said: "There's no election today. What I'm not doing is setting out a manifesto for four years' time."
The Conservative leader also described rising health spending as a "conundrum", with a similar approach having been taken "again and again".
In reference to a pro-Brexit campaign stunt, Mrs Badenoch said: "I mean, who remembers the side of a red bus that said 'we're going to give the NHS £350 million more a week'?
"Many people don't know that we did that. We did do that, and yet, still we're not seeing the returns. We've put more and more money in, and we're getting less and less out."