Chancellor hikes taxes by £26bn in long-awaited Budget

(Sharecast News) - Rachel Reeves upped taxes and scrapped the two-child welfare cap on Wednesday, as she unveiled her long-awaited and much-leaked Budget to Parliament - less than an hour after it was accidentally published by the government's fiscal watchdog. The chancellor unveiled a package of tax-raising measures, many of which had been trailed in the Budget's long run-up, worth £26bn.

Last year's Budget raised taxes by £40bn.

One of the largest contributions will come from freezing income tax thresholds to 2031, a year longer than initially expected.

It means that by the end of the period, tax thresholds - which were first frozen by then Conservative chancellor Rishi Sunak in 2021 - will have been left unchanged for a decade.

Other tax hikes announced by Reeves included reformation of gaming and gambling taxation, a levy on properties worth than £2m, and a 2 percentage point increase in income tax on dividends, savings and property.

Reeves opened her speech by calling the early publication of the Office for Budget Responsibility's economic and fiscal outlook "deeply disappointing and a serious error on their part".

The outlook, normally published after the chancellor sits down, was accidently posted online late on Wednesday morning.

The OBR apologised and said it would investigate the "technical error".

Its outlook said Reeves would double her fiscal headroom to £22bn by the end of the currently Parliament, £12bn more than was predicted in March. But it also slashed the economic growth forecast for 2026, to 1.4% from 1.9%.

As a result, the OBR now expects GDP to grow by 1.5% on average over the five-year forecast period, 0.3 percentage points slower than its previous outlook.

Reeves blamed the lower forecast on weak underlying productivity growth, which she called "the Tories' legacy".

According to the OBR, the government will have received £16bn less in tax receipts by 2030 because of low productivity.

However, Reeves insisted the government would beat that prediction, telling MPs: "We beat the forecast last year and we will beat them again."

National debt is expected to reach £2.6trn this year.

But Reeves insisted her fiscal rules would "get borrowing down while supporting investment", with a surplus of £3.9bn forecast by 2028/29.

Inflation was predicted to end the year at 3.5%, slightly higher than the 3.2% predicted in March.

The OBR also lifted its inflation forecast for 2026, to 2.5% from 2.1%, but maintained its 2% outlook for the following three years.