Rachel Reeves turned the screw on Britain with another huge tax assault today – as she splashed ever more cash on benefits.
In farcical scenes at Westminster, an ashen faced Chancellor was left scrambling after her crucial package was accidentally put online before she even had a chance to deliver it to MPs.
And the situation deteriorated swiftly from there for Ms Reeves as the scale of her raid became clear.
She is set to raise an extra £30billion a year by 2030-31 – including an eye-watering £12.7billion from extending the tax threshold freeze for another three years.
Around a quarter of the working population will be paying higher or top rate tax by then, up from just 15 per cent when it was imposed in 2021. The higher rate threshold would have been £70,370 by 2030 instead £50,270 if it had risen in line with inflation.
The tax burden is due to reach a new peak as a proportion of GDP in records that go back more than 300 years.
When she finally rose to speak, Ms Reeves told the House she was asking everyone to ‘contribute’, despite pledging just 12 months ago that the freeze would not be prolonged because it hurts ‘working people’. She later tried to argue that the Labour manifesto had only committed to keeping the ‘rates’ of income tax the same.
Ms Reeves claimed that productivity downgrades from the OBR watchdog meant there was no choice about battering Brits, but in fact the fiscal position only changed marginally. She has refused to rule out coming back for more at another fiscal event.
But Kemi Badenoch raged that it was a ‘Budget for benefits’, pointing to a huge splurge on handouts.
‘She has chosen to put up tax after tax after tax,’ the Tory leader said, mocking Ms Reeves for complaining she was the victim of sexism and ‘mansplaining’.
The OBR’s extraordinary blunder in publishing their documents early came just minutes after Ms Reeves brandished her red box outside 11 Downing Street.
Images from the Commons appear to show the moment during PMQs that she was handed a phone by minister Torsten Bell, informing her of the development.
The Chancellor sought to throw the blame entirely on the watchdog saying it was ‘deeply disappointing and a serious error on their part’. One of her Labour predecessors, Hugh Dalton, quit in 1947 after details were published in an evening newspaper before his speech.
One government aide joked ruefully that they should ‘defund the OBR’, while the soft-Left Tribune group of MPs demanded ‘reform’ of the independent body.
Other measures laid out in the documents include:
- So-called ‘salary sacrifice’ tax reliefs – such as for pension contributions – will be limited to £2,000 a year to raise £4.7billion.
- Increasing the tax rates on dividends, property and savings income by 2 percentage points, raising £2.1 billion;
- A new mileage-based charge for EVs and hybrids will be introduced from April 2028, raising £1.4billion;
- A tax on gambling will bring in £1.1 billion a year – although horse racing is exempted;
- A ‘mansion tax’ of up to £7,500 a year on properties worth over £2million, to raise £400million;
- The U-turns on benefits curbs and scrapping winter fuel allowance have cost £7billion;
- The annual limit on cash ISAs is being cut from £20,000 to £12,000, but will stay the same for those aged over 65;
- Labour’s plan for compulsory ID cards is expected to cost £1.8billion over the next three years.
Rachel Reeves imposed huge Budget tax hikes today and splashed the cash on handouts to placate increasingly mutinous Labour MPs
Images from the Commons appear to show the moment she was handed a phone by minister Torsten Bell, informing her of the development
Rachel Reeves brandished her red box outside 11 Downing Street as she gears up to impose another scorching round of tax hikes in her big set-piece at 12.30pm
The Chancellor conducted the traditional pre-Budget photo op outside No11
The OBR has apologised and launched an investigation into the blunder, which sparked turmoil in Westminster and on markets.
It teed up a dramatic session in the Commons as Ms Reeves and Keir Starmer try to get back on an even keel.
Just a year ago Ms Reeves vowed she would not be coming back for more taxes.
And Labour promised at the manifesto that there would be no increase to the burden on ‘working people’.
The OBR document revealed the decision to freeze income tax thresholds for three years – longer than the two years expected – will drag 780,000 more people into paying the basic rate and 920,000 into the higher rate band.
That is compared to the original plan for the freeze to end in 2028.
The new ‘mansion tax’ will see higher value properties revalued.
A ‘surcharge’ of £2,500 will be placed on those worth between £2million and £2.5million.
The highest band of £5million-plus will be hit with a £7,500 charge, which will be uprated by inflation every year.
Fuel duty will be frozen for five months until September, but the government has told the OBR that from then the 5p relief introduced by Rishi Sunak in 2022 will be phased out.
From April 2027, fuel duty will be uprated annually by RPI.
The two-child benefit cap is set to be axed in a bid to placate mutinous Labour MPs, leaving around 18,000 large families in line to pocket an extra £14,000.
The OBR said 560,000 families will receive extra cash, costing around £3billion a year.
Overall welfare spending is forecast to be £16billion higher by 2030-31 than the watchdog thought as recently as March.
Alarmingly, the Government said annual spending on welfare per year is forecast to rise from £333billion in 2025-26 to £389.4billion in 2029-30.
That is higher than the previous forecasts of £326.1billion in 2025-26 and £373.4billion in 2029-30, reflecting the bumper sums being added by Ms Reeves
Spending on health and disability benefits per year is now forecast to rise from £83.1billion in 2025-26 to £103.6billion in 2029-30.
That is up from the previous forecasts of £81.2billion in 2025-26 and £97.7billion in 2029-30.
The OBR has upgraded its growth forecast from 1 per cent to 1.5 per cent this year.
However, there were grim downgrades for every year after that.
The underlying productivity trend is seen far more negatively, with a 1 per cent a year improvement pencilled in for the medium term. That is 0.3 percentage points slower than the March estimate.
‘The UK’s productivity performance has undershot our forecasts, despite several substantial downgrades since 2010, as a significant rebound from recent negative shocks has not materialised,’ the OBR said.
The tax increases offset the productivity downgrades and spending boosts to leave £22billion of headroom for Ms Reeves’ main fiscal rule, of balancing the books by the end of the forecast period.
The watchdog sees inflation staying significantly higher for longer than previously anticipated.
CPI is expected to average 3.5 per cent this year and and 2.5 per cent in 2026, 0.2 and 0.4 percentage points respectively above the March forecast.
The level will not return to the Bank of England’s 2 per cent target until 2027, a year later than foreseen before.
Ms Reeves said tax rates on property, savings and dividend income will rise by two percentage points.
She told the Commons: ‘Currently, a landlord with an income of £25,000 will pay nearly £1,200 less in tax than their tenant with the same salary because no National Insurance is charged on property, dividend or savings income.
‘It’s not fair that the tax system treats different types of income so differently and so I will increase the basic and higher rate of tax on property, savings and dividend income by two percentage points, and the additional rate of tax on property and savings income by two percentage points.
Kemi Badenoch accused the Chancellor of a ‘Budget for benefits’, pointing to a huge splurge on handouts
‘Even after these reforms, 90 per cent of taxpayers will still pay no tax at all on their savings.’
Ms Badenoch cited the Channel 4 show Benefits Street, which focused on life on a street in Birmingham.
She said the package of measures were a ‘smorgasbord of misery’ from the Chancellor.
She said: ‘Today she has announced a new tax raid of £26 billion. They’re all cheering.
‘Household income is down. Spending policies in this Budget increase borrowing in every year.
‘That smorgasbord of misery we have heard from her can be summed up in one sentence. Labour are hiking taxes to pay for welfare. This is a Budget for Benefits Street, paid for by working people.
‘This Budget increases benefits for 560,000 families by an average of £5,000. They are hiking taxes on workers, pensioners and savers to pay for handouts to keep their backbenchers quiet.’
The IFS think-tank pointed out that Ms Reeves is relying on yet more borrowing in the short term to make ends meet.
‘To bear down on borrowing in later years and deliver that increase in ‘headroom’, the Chancellor is relying heavily on tax rises towards the back end of the parliament,’ director Helen Miller said.
‘More borrowing for the next few years, then a sharp adjustment. Spend now, pay later.
‘The surprising piece of news relates to the OBR forecast. Alongside a widely-expected, but fairly modest, downgrade to the forecast for productivity growth, a higher inflation forecast pushed up the forecasts for spending on benefits and the state pension.
‘The considerable pressures from rising special educational needs spending are also being acknowledged more transparently in the forecast.
‘Luckily for Rachel Reeves, these upwards pressures on spending were largely offset by higher tax receipts.
‘These higher receipts were driven by the interaction between higher inflation, faster wage growth, and an array of frozen tax thresholds, but also by a shift in the composition of economic activity towards areas which are taxed more heavily.’
Cabinet met this morning to formally sign off the plans, with the Pound and yields on gilts – the way the government borrows money – subdued.
Sir Keir told them the Budget represented the ‘kind of country we want to live in’, adding that the ‘fight was between renewal or decline – and this government chose renewal’.
Ms Reeves told ministers that she had made the ‘fair and necessary choices to strengthen our foundations and drive down the cost of living’.
There have been warnings that markets will hammer the Pound and drive up the cost of servicing the UK’s massive debt mountain unless the Chancellor shows she has a ‘credible’ plan.
Ms Reeves already has the grim distinction of having delivered the biggest tax-raising Budget on record – around £41billion.
The £30billion scoring for this package would make it the fifth biggest on record.
Ms Reeves looks on track to increase taxes by more in just 16 months than Gordon Brown managed during a decade in No11.
The OBR said the tax burden is now set to reach 38.3 per cent of GDP in 2030-31.
That is the highest in more than 300 years of official records.
The humiliating ditching of wider reforms to welfare and the reversal of winter fuel allowance cuts have contributed to a grim situation for Ms Reeves.
She blamed a bewildering array of factors from Brexit and Tory austerity to Donald Trump for her woes.
But businesses have pointed to the huge Budget national insurance raid for crushing growth, and lashed out at the ‘fandango’ of weeks of confused briefing about the contents of the Budget.
Chancellor surrenders to Labour revolt with benefits splurge
Rachel Reeves surrendered to Labour backbench rebels today by lifting the two-child benefit cap – as part of a welfare spending splurge that experts said will cost taxpayers an extra £16billion.
The Chancellor confirmed the cap, which limits universal credit and tax credit claims to two children in most households, will be lifted from April, nine years after it was brought in by the Tories.
Removal of the cap has been the source of a major internal Labour row since it took power, with several MPs suspended for voting for an SNP motion to scrap it in 2024.
Labour MPs cheered when the Chancellor made the announcement, but the Office for Budget Responsibility (OBR) said it would add £3.1billion to the estimated cost of child benefit estimate made six months ago.
Despite the repeated calls from campaigners and some Labour MPs, YouGov polling earlier this month of just over 5,000 adults suggested 57 per cent were in favour of keeping the policy.
The OBR, whose scorecard was sensationally published early before the Budget even started, also said that the Treasury would take an additional £1.7billion hit from its decision to water down the removal of the £350 winter fuel allowance for pensioners.
It also revealed that higher disability payouts would add £1.4billion to the bill, thanks to a U-turn by the Chancellor on a crackdown on personal injury payments (PIP) given to those who say they are too ill to work, when faced with a similar Labour rebellion.
Reeves’ new stealth raid on workers and pensioners as tax thresholds are put on hold for THREE MORE years
Millions of workers and pensioners face a brutal assault after Rachel Reeves today extended the hated ‘stealth raid’ in her Budget.
The Chancellor is set to keep the long-running freeze on personal tax thresholds in place for another three years beyond 2028.
It means the income tax personal allowance will remain at £12,750 until 2030-31.
And the higher rate and additional rate thresholds will remain at £50,270 and £125,140, respectively, over the same period.
The Office for Budget Responsibility (OBR), which took the blame for a leak of Ms Reeves’ Budget measures before she announced them, said the move would raise around £8billion a year.
The long-running freeze to tax thresholds will mean an extra 5.2 million Britons are paying income tax between 2022-23 and 2030-31.
Over the same period, 4.8million more taxpayers will have moved to the higher 40p rate, and 600,000 more to the additional 45p rate.
The OBR watchdog found the three-year extension to the freeze announced by Ms Reeves on Wednesday meant an extra 780,000 more basic rate income tax payers by 2029/30.
The OBR has launched an inquiry into the leak
There will also be 920,000 more higher rate and 4,000 more additional rate income tax payers in 2029/30 due to the Chancellor’s latest action, it added.
The extended freeze to tax allowances and thresholds between April 2021 and April 2031 is estimated to raise a total of £67billion.
It will also likely mean millions of pensioners having to pay income tax over the coming years.
This is because, under the terms of the ‘triple lock’, the state pension is set to soon be worth more than £12,570 per year.
It will mean the Government is effectively giving to pensioners with one hand, while taking with the other.
The Institute for Fiscal Studies think-tank has said the move to freeze tax thresholds breaks the spirit and letter of Labour’s manifesto, which promised not to raise taxes on ‘working people’.
It also flies in the face of Ms Reeves’ own words at the Budget last year, when she made a point of saying she would stand by the commitment to end the freeze.
The policy has been in place since April 2021, and has proved one of the biggest tax-raisers in UK history as wages have risen sharply to keep pace with inflation.
Andrew Prosser, head of investments at InvestEngine, said: ‘Rachel Reeves has confirmed frozen income tax thresholds will now extend to 2031.
‘This isn’t just a technical tweak, it’s a stealth tax. By 2031, well over a million people will pay income tax, with higher-rate taxpayers creeping up to more than 10 million.
‘If you’re near the £50,270 threshold, just a couple of decent pay rises could push you from 20 per cent to 40 per cent tax.
‘For higher earners, this policy could see half a million more people fall into the £100,000 tax trap, where every extra £2 earned costs £1 of your personal allowance, effectively a 60 per cent tax rate.’
‘Mansion tax’ to hit London and South East… but could millions more homes be caught up?
Rachel Reeves launched a ‘mansion tax’ attack on London and the South East today – despite the Treasury’s own watchdog warning it will cost the government money.
Homes worth more than £2million face a ‘surcharge’ as the government bows to Labour demands to punish the ‘wealthy’.
The annual levy will be £2,500 for those worth up to £2.5million.
And the highest band of £5million-plus will be hit with a £7,500 charge, uprated by inflation every year.
Although only around 100,000 properties are thought to be directly in the firing line, experts have warned of major impacts for the property market.
Over the next three years before the charge takes effect it is expected to cost the government £300million due to falling stamp duty revenue. After that it will only raise £400million annually.
It is also unclear whether the consequences will be felt far more widely.
The Chancellor is ordering a revaluation of 2.4million Band F, G and H properties in England to facilitate the levy.
There are concerns that some of those properties could see their bands changed as prices have shifted dramatically since 1991, the current baseline.
Sources suggested the valuations of 2.3million of those homes will be simply ignored.
Kate Allen, 45, founder and owner of Finest Stays, a luxury holiday letting agency based in Kingsbridge, Devon, told the Daily Mail: ‘When you manage over 100 high-value holiday homes, most worth £2million-plus, you see very quickly how sensitive the top end of the housing market is to policy shifts, and these proposals risk slowing it dramatically.
Kate Allen, founder and owner of Finest Stays, a luxury holiday letting agency based in Devon, manages more than 100 high-value holiday homes, most worth more than £2million
Chancellor Rachel Reeves delivers her Budget in the House of Commons this afternoon
‘We’re already seeing developers choosing to holiday-let rather than sell because the economics now make more sense.
‘If a mansion tax can be avoided by switching to business rates, we’ll see a wave of wealthy homeowners letting for the 70+ nights required to qualify.
‘And if a mansion tax still applies even on business rates, we’ll be under even more pressure to drive higher-value bookings simply so owners can cover the rising cost of holding a high-value home.
‘High-value homes aren’t just luxury assets; they’re a major economic engine. Discourage ownership or development at the top, and you don’t just hit wealthy individuals, you hit the entire ecosystem of trades, suppliers, builders, local businesses and tourism that depends on them.’
The overhaul comes despite then-Labour frontbencher Jon Ashworth vowing during the election campaign: ‘We’re not changing council tax banding.’
Britain faces five years of stagnating living standards, warns OBR
Britain faces five years of stagnating living standards as inflation and higher taxes bite, Budget forecasts reveal.
The Office for Budget Responsibility (OBR) downgraded its forecast for real household disposable income – saying it would grow by just a quarter of a per cent a year.
It came as the OBR also cut the UK growth outlook for every year from 2026 and revealed that cumulative borrowing will be nearly £70billion higher than previously thought.
The sluggish outlook for living standards was worse than expected at the time of the Chancellor’s spring statement in March – despite Labour’s claim to be tackling the cost of living.
That is because inflation will be higher than previously feared as well as thanks to the £26billion tax raid announced by Rachel Reeves.
Taxes as a share of GDP will reach an all-time high of 38 per cent.
The OBR’s forecasts, published alongside the Budget, upgraded gross domestic product (GDP) for this year from 1 per cent to 1.5 per cent.
But the outlook for 2026 has been cut sharply from 1.9 per cent to 1.4 per cent and has also been downgraded for every year until 2029.
That is partly as a result of a widely-expected cut in the outlook for productivity growth – the ability to do more with less.
The OBR forecasts that borrowing this year will be £21billion higher than previously expected. It has also been upgraded for the following three years though by 2029-30 will be £6billion lower. Borrowing for 2024-25 has also turned out to be £12billion more than previously thought.
It means that added together, borrowing is on course to be £69billion higher than predicted back in March, according to the OBR.
And the watchdog said much of that is the result of Labour’s welfare U-turns and net zero policies, which are on course to add £11billion a year to the borrowing bill.
The ‘headroom’ for meeting the Chancellor’s targets to bring down borrowing and debt will double from £10billion to £22billion – but still remains a ‘small margin’ given economic uncertainties, the OBR said.
‘While this Budget addresses some fiscal risks and increases the margin held against the Government’s fiscal targets, it still leaves the UK public finances relatively vulnerable to future shocks,’ the report said.
Millions of pensioners to receive £575 boost under ‘triple lock’ – but there’s a ‘sting in the tail’ in future years
Around 13 million retirees are in line for a boost after Rachel Reeves used her Budget to commmit to continuing the ‘triple lock’ on state pensions.
From April, the rate of the full new state pension is expected to increase to just over £240 per week – an increase the Chancellor said was worth £575 per year.
At the same time, the full basic state pension is expected to rise by around an extra £440 per year.
The ‘triple lock’ sees the state pension rise each April in line with whichever is highest out of average earnings growth, inflation or 2.5 per cent.
Next year’s expected 4.8 per cent increase – in line with wages growth – means those on the full new state pension could get £241.30 per week, or around £12,548 per year.
Those on the full basic state pension could see their weekly payment rise to around £184.90. Many pensioners do not receive the full state pension.
But pensions experts warned an upcoming rise in the state pension under the terms of the triple lock came with a ‘sting in the tail’.
They pointed to how the state pension could soon be worth more than the annual tax-free personal allowance of £12,570, which Ms Reeves has now frozen until 2030-31.
This means millions of pensioners could face having to pay income tax over the coming years.
From April, the rate of the full new state pension is expected to increase to just over £240 per week – an increase the Chancellor said was worth £575 per year
Steven Cameron, pensions director at Aegon, said: ‘While welcome, the increase does come with a sting in the tail for future years.
‘Under the triple lock, the full state pension will increase by a minimum of 2.5 per cent in future years, meaning in 2027/28 it will be at least £12,861.
‘This is above the personal allowance of £12,570, which is already frozen until April 2028, with speculation of an extended freeze until 2030.’
He added: ‘Those with solely a state pension could face receiving letters from the taxman demanding they pay the tax due.’
Ms Reeves said: ‘Whether it’s our commitment to the triple lock or to rebuilding our NHS to cut waiting lists, we’re supporting pensioners to give them the security in retirement they deserve.’
Milkshakes and lattes could go up in price as Labour extends sugar tax
Pre-packaged milkshakes and lattes could go up in price after Labour extended the sugar tax to dairy-based drinks.
As part of her Budget measures, Chancellor Rachel Reeves is ending the exemption for milk-based beverages from the existing tax on sugary drinks.
The move will affect products such as packaged milkshakes, coffees and sweetened yoghurt drinks, but not drinks made on site in cafes and restaurants.
The Government is also reducing the maximum amount of sugar allowed in drinks to 4.5g of sugar per 100ml.
Companies have until January 2028 to remove sugar or face the new charge.
The sugar tax, also known as the soft drinks industry levy (SDIL), is a tax on pre-packaged drinks such as those sold in cans and cartons in supermarkets.
It applies to manufacturers and was introduced by the previous Tory government in 2018 to help drive down obesity, including among children.
According to the Treasury, children’s sugar intake in the UK is more than double the recommended maximum of no more than 5 per cent energy from free sugar.
The existing levy has led to a 46 per cent average reduction in sugar between 2015 and 2020 for those soft drinks that were to be brought under the rules.
Bottles of Yazoo flavoured milkshake drinks are lined up for sale on the shelf of a supermarket in Manchester
As he announced the tax extension to MPs on Tuesday, Health Secretary Wes Streeting said: ‘Obesity robs children of the best possible start in life, hits the poorest hardest, sets them up for a lifetime of health problems and costs the NHS billions.
‘So I can announce to the House, we’re expanding the soft drinks industry levy to include bottles and cartons of milkshakes, flavoured milk and milk substitute drinks.’
But business experts raised concerns about the effect of the extended tax on the already-struggling high street and hospitality sector, as well as dairy farmers.
Nick Garside, VAT partner at business advisory firm Menzies, said: ‘The milkshake tax is another blow to businesses already drowning in complex taxes and soaring fixed costs.
‘If this isn’t balanced with meaningful business rates reform for hospitality, leisure, and retail, it’s a clear net negative for growth.
‘While the levy targets only packaged drinks, not fresh cafe-made shakes, it still shakes up a struggling sector, and piles on administrative burden and cost at a time when margins are already diluted and consumer demand dwindles.’
Andrew Opie, director of food and sustainability at the British Retail Consortium, said: ‘Supermarkets are working hard to make the food and drink they produce healthier and more affordable.
‘The inclusion of milk-based drinks, which are an important source of calcium for many people, could push up the price of these drinks and put further pressure on British dairy farmers.’
Millions of lower-paid workers to get a pay boost as Rachel Reeves raises minimum wage rates
Millions of lower-paid workers are in line for a pay boost after Rachel Reeves raised minimum wage rates.
From April next year, the National Living Wage will rise by 4.1 per cent to £12.71 an hour for workers aged 21 and over.
This is expected to increase the annual earnings of around 2.4million full-time workers by £900.
The National Minimum Wage, for 18 to 20-year-olds, will also rise in April by 8.5 per cent to £10.85 an hour.
This is expected to increase the annual earnings of full-time workers under the age of 21 by £1,500, which will further narrow the gap with the National Living Wage.
In Labour‘s manifesto prior to last year’s election, the party vowed to ensure all adults are entitled to the same minimum wage by removing ‘discriminatory age bands’.
The Chancellor used her Budget on Wednesday to confirm the increases after accepting the recommendations of the independent Low Pay Commission.
The National Minimum Wage for 16 and 17-year-olds and those on apprenticeships will also increase by 6 per cent to £8 per hour.
Millions of lower-paid workers are in line for a pay boost after Rachel Reeves raised minimum wage rates
Ms Reeves said around 2.7 million workers would see their pay packets boosted by the rises.
‘I know that the cost of living is still the number one issue for working people and that the economy isn’t working well enough for those on the lowest incomes,’ she said.
‘Too many people are still struggling to make ends meet. And that has to change.
‘That’s why I’m announcing that we will raise the National Living Wage and also the National Minimum Wage, so that those on low incomes are properly rewarded for their hard work.’
But business leaders and economists warned the rises could simply result in more young people being left on the jobs scrapheap as the cost of employing them spirals.
Jane Gratton, deputy director of public policy at the British Chambers of Commerce, said: ‘Every above-inflation wage increase leads to higher business costs, lower investment and fewer opportunities for individuals.
‘Making employment more expensive risks deepening the jobs crisis among young people.’
Nye Cominetti, principal economist at the Resolution Foundation think tank, said: ‘The latest rise in the National Living Wage – while small compared to recent history – will nonetheless deliver a welcome wage boost to more than two million workers and their families.
‘Younger workers are set for an even bigger pay rises – but these steep increases risk causing more harm than good if they put firms off hiring and push up NEET rates.
‘The minimum wage has good to claim to be Britain’s biggest policy success in a generation.
‘But at its higher level the Government and Low Pay Commission need to act with more flexibility when setting rates so they can respond to changing labour market conditions.’
Katherine Chapman, Director of the Living Wage Foundation, said: ‘The boost to the legal minimum wage is a really positive move that will ease some of the pressure on low paid workers hit by sharp price rises over the last year.
‘It will still fall short of the voluntary real Living Wage which is the only wage rate based solely on the cost of living.
‘The real Living Wage is currently £13.45 in the UK with a higher rate of £14.80 in London.
‘Over 16,000 employers are already committed to going beyond the statutory minimum to make sure all their workers… are always paid a wage that meets living costs so can live with dignity.’
Hotels and AirBnBs to be targeted with a new ‘bed tax’ as Labour gives mayors the power to impose levies
Hotels, bed and breakfasts, guest houses and holiday lets are all set to be targeted with a new ‘bed tax’.
Ministers are giving the go-ahead for regional mayors in England to impose the charges, heaping costs on stays for Britons as well as foreign tourists.
The level will be set locally, but is expected be around £2 a night.
It could raise hundreds of millions of pounds a year in total, with London by far the biggest beneficiary.
A slew of Labour mayors reacted with jubilation at the prospect – although Ben Houchen, the Tory mayor of Tees Valley, has made clear he will shun the ‘cash grab’.
The hospitality industry accused the Labour Government of breaking a vow not to go ahead with the ‘damaging’ policy, warning it will ‘undermine investment’.
Supporters of the charge – being put for consultation until February 18 – point out that other major global cities such as Paris have a similar policy, while Manchester already has a ‘business levy’.
Critics point out that British people spend hundreds of millions of nights at hotels and bed and breakfasts in England every year – and will have to pick up a bigger tab.
Hotels, bed and breakfasts, guest houses and holiday lets are all set to be targeted with a new ‘bed tax’
The Government said money raised could fund local projects that ‘improve communities and enhance the experience of tourists’.
Officials insisted research suggested ‘reasonable’ fees have little impact on visitor numbers.
Seven Labour mayors hailed the decision, with London’s Sir Sadiq Khan saying it was ‘great news for London’.
‘The extra funding will directly support London’s economy, and help cement our reputation as a global tourism and business destination,’ he added.
Labour’s Liverpool Metro mayor Steve Rotheram said: ‘Cities like Barcelona and Paris raise tens of millions each year through similar schemes.
‘This is money that goes straight back into improving the visitor experience and supporting the local people who keep those destinations thriving.’
Kate Nicholls, chair of UKHospitality, said: ‘The Government has gone back on its word and introduced a damaging holiday tax.
‘This is a shocking U-turn that will only make life more expensive for working people.
‘It could cost the public up to £518 million in additional tax when they travel in the UK and having knock-on impacts for the wider hospitality sector.
‘Make no mistake – this cost will be passed directly onto consumers, drive inflation and undermine the Government’s aim to reduce the cost of living.’
Train ticket prices frozen for the first time in 30 YEARS – but will yours still go up?
Train ticket prices are to be frozen for the first time in 30 years, Rachel Reeves has confirmed.
Ministers heralded the move as saving millions of travellers hundreds of pounds with commuters on the more expensive routes will save more than £300 a year.
The Government said the changes are part of its plans to rebuild a publicly owned Great British Railways that will deliver value for money through bringing rail tickets into the 21st century with tap in tap out and digital ticketing, alongside investing in superfast wifi.
But the announcement, trailed ahead of the Budget, only covers regulated fares, which include standard class fares such as saver returns, standard returns, off-peak fares between major cities and season tickets for most journeys.
The policy does not apply to ‘unregulated’ fares include first class, advance purchase and saver tickets – with train operators remaining free to determine those fares.
They make up around half of all train tickets sold. Simon Calder, transport correspondent for The Independent, said the announcement ‘doesn’t guarantee that no tickets will cost more’.
The announcement only covers regulated fares like saver returns, standard returns and season tickets
He cited one example of an unregulated fare being an anytime one-way single from London Euston to Manchester Piccadilly which currently costs £193.
Mr Calder wrote: ‘More than half of fares are unregulated, including that London-Manchester ticket.
‘But I imagine the Transport Secretary Heidi Alexander would have a stern word if Avanti West Coast were to propose putting up the cost beyond £200.’
Ms Alexander was questioned about unregulated fares on the BBC at the weekend, and whether they would rise to compensate for the freeze on regulated options.
She said: ‘No, this is a fully funded policy and the Chancellor will be setting out more information at the Budget.
‘Regulated fares have tended to inform the price of unregulated fares. They track against each other normally.
