Its base is her austerity budget of a year ago.  It maintains the spending plans of that budget but with cuts in overall spending towards the end of the four year period.  The main increases in spending is on abolishing the two-child cap on child benefit, rightly reviled because of its massive creation of child poverty.  A limited backtrack on winter fuel allowance for the elderly was introduced in the summer.   

The budget raises an extra £25bn a year in tax rises – around 2.5% of government revenue – a drop in the ocean.  £12bn a year of that is from an increase in income tax taken; the rates of income tax are unchanged, as promised in Labour’s 2024 manifesto, but Reeves has continued a freeze on income tax thresholds for the next three years (the threshold from zero to 20% on income above £12,500, from 20% to 40% on income above £35,000).  It is therefore at the expense of low and medium income people.  Taxation on ISA savings is to increase.  The tax on online gambling is doubled.  The most of remaining increase in revenue comes from taxes that fall mainly on the better-off: taxation of top up pension payments, income from dividends, property and savings, and a ‘mansion tax’ on houses worth over £2m. 

Reeves also announced measures to reduce the cost of living.  These do not involve extra government spending.  She cut the green levy on energy bills which was introduced by the Tories, whose proceeds go to green initiatives such as insulating homes and installing heat pumps.  This is not only a blow to dealing with the climate emergency; it means extra costs indefinitely for those living in badly-insulated houses and reliant on gas boilers – robbing Peter to pay Paul.  She froze rail fare rises.  

The budget therefore does nothing for the 90%.  It plays straight into the hands of Reform.

The spin

What does the government want to achieve through this budget?  It has three aims:

1. To fill a £25bn a year ‘hole’ in government revenue, to placate the financial institutions who buy government bonds (‘gilts’).  A few comments on this aim.  First, note that Reeves does not say that the tax rise is needed to maintain public services and benefits, which would imply that she cared about them; it is rather to reassure the City of London.  Second, the ‘hole’ is wholly a result of Reeve’s fiscal rules, the entirely arbitrary and rightwing rules which she chose to inherit from the Conservatives.  Third, the supposed size of this hole fluctuates wildly from month to month, and is impossible to estimate accurately.  Since the summer, Reeves has chosen to publically fine-tune her budget plans to the latest figure for the hole.  This is ridiculous – virtue signalling to the City.  There are massive uncertainties in economic forecasting even over the next year.  Consequently, many financial commentators and leading figures in the City have said that there is no such hole that needs filling.  Fourth, Reeves has justified both of her budgets by ‘the need to avoid the Truss debacle’.  Truss announced £45bn a year of tax reductions on the rich without saying how spending would be cut by the same amount, thus increasing government borrowing by £45bn a year, resulting in a leap in the interest rate required on government bonds, which sets interest rates across the economy.  But Reeves’s comparison is spurious, as there is nothing comparable to Truss’s budget going on now. 
2. The government’s second aim is to address the cost of living crisis.  This figures large in focus groups and opinion polls. Starmer and Reeves want to be seen to be offering something to ordinary people.  They can now say that that they are addressing the cost of living.  Job done!
3. A third aim is to be able to claim that the burden of taxation will fall on ‘the broadest shoulders’.  Before the budget, Reeves said that ‘everyone needs to chip in’.  But immediately after it, she turned into an egalitarian and claimed that she was making the rich pay more.  This rhetoric is supposed to appeal to the 75% of the population who think that the distribution of income and wealth is unfair (a view which is particularly strong among Reform voters).  But Reeves’s claim to be shifting tax towards ‘the broadest shoulders’ is a lie.  Most of her tax increase falls on low and medium income people.  The headline-grabbing mansion tax raises a measely £400m a year.  Moreover, it was widely expected that Reeves would introduce a levy on bank profits which have boomed in the last few years; but she did not.  So much for the ‘broad shoulders’.

What the budget fails to do

Budgets are an opportunity to announce structural changes to public services and benefits, to taxes, to regulation of the private sector.  This is partly because these have large impacts on spending and tax revenue.  But there were none. 

Notable were: –

• No change to the government’s policy of outsourcing and new Public Finance Initiatives in the NHS.  Both of these are drains on the NHS’s finances far into the future.

• No pledge to take social care away from the US private equity firms that largely run it, and bring social care into public ownership.  The private owners have presided over atrocious care, abysmal wages and conditions for the 2.5 million staff, and sky-high prices charged to local authorities.

• No pledge to bring the water and sewage companies back into public ownership.  These have done nothing to expand sewage works, thus ineivtably discharing untreated sewage into rivers and the sea, nothing to increase reservoir capacity, and nothing to staunch loss of water through pipes.  Since privatisation the owners have paid out £60bn in dividends, and taken out £60bn of loans to pay them.  They are all bankrupt, and therefore, even on capitalist criteria, are worth nothing and could be nationalised for nothing.  But the government refuses to do this, because it sees every issue solely through the eyes of capital.

The mansion tax is a tiny tweak to the council tax system.  This system, designed by John Major on the back of an envelope to replace Thatcher’s poll tax, is, to put it kindly, a shambles.  It is regressive (benefits the rich and disbenefits the poor) between people of different income, and regressive between local authorities.  It needs replacing with a property tax which is steeply progressive by income, and which the government then redistributes between rich and poor local authority areas. 

These structural scandals are now well-known to most of the population.  But apparently not to the government.  This is in part because Labour party members and MPs who were knowledgeable about these issues have been purged, and because all departments are now run, not by the minister, but by the Treasury and the chancellor, who are only interested in the short term accounts.  

The elephant in the room: taxation of capital

Even if the structural reforms mentioned above were enacted, there would still be the need to raise much more tax revenue, as I discuss in my booklet Labour’s Extreme Neoliberalism (Resistance Books, 2025).  This is necessary properly to fund public services, state benefits and (a usually neglected point) greatly increase the number of civil servants and local government officers who regulate the private sector.  The increase in tax revenue should not come from the 90%, but from the rich and taxes on capital.  It needs to be of the order of £150bn or more, that is, a 15% increase in total taxation. 

In the manifesto for the 2019 general election, Corbyn and McDonnell proposed to raise an extra £83bn a year from the super-rich (around £10bn a year) and from taxes on capital.  This would be around £110bn in present day values.  But since then, the Labour left has shrunk its demand for taxation down to a wealth tax, and, worse, seems to have forgotten about taxation of business.  

Regarding taxation of the rich, Aditya Chakrabortty, writing in The Guardian (20 November), has pointed out the inadequacies of a wealth tax, not least that it is very difficult to administer.  There are better ways to tax the rich: raising the present highest income tax rate from 45%; raising capital gains tax to the highest rate of income tax (it is presently only 20- 32%); increasing inheritance tax on large estates and closing loopholes in it; and a progressive property tax as above.  

Taxes on business can raise many times more than taxes on the rich.  Some examples.  The current rate of corporation tax, the main tax on corporate profits, is 25%, but after allowances it is effectively only 13%.  Ten years ago, Kevin Farnsworth counted £95bn in effective subsidies and tax breaks to corporations, what he termed ‘the corporate welfare state’.  In 2024 the National Audit Office found that there were 341 tax breaks to corporations worth £204bn a year.  These have been justified as increasing investment and innovation, but none of these subsidies has been subject to evaluation.  The abysmal rate of productive investment and productivity in increase in Britain suggest that beneficial effects of corporate subsidies are minimal, and that, like other profits of corporations, they are distributed as dividends or in speculation.  A cull of these subsidies could reap more than £100bn a year – ten times the yield of a weath tax.

Another easy win would be a Development Gains Tax on the profit made by landowners on granting of planning permission for a new development.  This profit has no legitimacy since it is wholly unearned.  A DGT at say 90% could raise tens of billions per year.

The state currently subsidies banks, notably through the interest it pays on bank reserves held with the Bank of England.  Reducing this by two-thirds, as suggested by a former governor of the Bank, would save the government £22bn a year. 

A tax on the super-profits of banks – which Reeves has just refused to do – should also be introduced. 

Proposals to increase tax on business are routinely met with the objection that this will be evaded by businesses headquartered outside Britain.  But all of the increases in business taxes I have mentioned are on transactions within Britain, and are levied irrespective of the location of the corporate headquarters.  To raise the revenues properly to fund our public services, benefits and regulatory agencies the left needs to direct its attention to taxation of the unearned and unproductive profits of corporations. 

The socialist left needs to formulate a plan for taxation of capital and the rich.  There is no lack of practical expertise on this, as organisations like the Tax Justice Network and radical academics like Prem Sikka have been working on this for years.  We need a People’s Plan for Tax.