Sir Keir Starmer outlines tax measures to protect services, prevent austerity in new budget

Ahead of Wednesday’s budget announcement, Prime Minister Sir Keir Starmer highlighted his government’s commitment to tackle “the harsh light of fiscal reality” with a budget that includes necessary tax increases to support public services and avert austerity measures. Speaking in Birmingham, Starmer indicated that while tough decisions lie ahead, “better days are coming” as his administration focuses on both protecting services and strengthening public finances.

One notable measure is a revised bus fare cap in England, which will rise to £3, effective through the end of 2025. Additionally, he pledged £240 million in funding to encourage people back into the workforce, reflecting his government’s focus on economic recovery and support for the labour market.

However, the prime minister stopped short of revealing specific tax rises but emphasized that “broader shoulders” should bear “a higher burden on tax,” suggesting that wealthier entities might face increased responsibilities. Starmer defended his position, arguing that balancing taxes with a functioning public sector is crucial, stating, “Nobody wants higher taxes, just like nobody wants public spending cuts, but we have to be realistic about where we are as a country.”

Critics, including the Conservative Party, have accused Labour of breaking its election promise not to raise taxes on working people, highlighting anticipated hikes in National Insurance Contributions (NICs) for employers and the likelihood of an extended freeze on income tax thresholds beyond 2028. Paul Johnson, head of the Institute for Fiscal Studies, noted that raising employer NICs could indirectly impact workers, as such costs are often transferred to employees.

The government is reportedly exploring options to tax asset sales, such as shares and property, and may adjust its debt rules to enable greater spending on infrastructure, key to Labour’s vision of long-term growth.

While Conservative shadow ministers accused Labour of misleading the public on tax plans, Sir Keir asserted the need for open and honest discourse on Britain’s financial situation. He invited critics to consider which taxes they would raise or which public services they would cut, pushing for transparency over “easy answers” that, he argued, only undercut trust in government.

Liberal Democrat leader Sir Ed Davey joined the debate, suggesting that Labour should focus tax measures on big corporations rather than individual taxpayers and small businesses. He advocated for increased taxes on banks, tech companies, and fossil fuel producers to offset the economic strain facing households and small enterprises. As the country awaits the formal budget announcement, many questions remain about how the proposed changes will impact the average taxpayer and the broader economy, setting the stage for potentially far-reaching reforms aimed at preserving public services amid economic pressures.