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Transport Secretary Rejects Claims Budget Leaks Harmed Economy
Transport Secretary Heidi Alexander has dismissed assertions that pre-Budget leaks have damaged the UK economy, despite warnings from former Bank of England chief economist Andy Haldane that prolonged speculation has caused "paralysis among businesses and consumers."
Haldane, speaking on the BBC's Sunday with Laura Kuenssberg, called the months of leaked proposals a "fiscal fandango" that has "flatlined" economic growth. He criticized the process as "too lengthy, too leaky, with real costs," acknowledging similar issues under past governments.
Alexander countered that pre-Budget speculation is routine, telling the program: "People always speculate in advance of a Budget, and we have always said, 'Wait until the Budget.'" She cited "shifting sands"-including revised productivity forecasts and global economic challenges-as complicating factors.
Chancellor Faces Pressure Amid Tax Hike Expectations
Chancellor Rachel Reeves is set to deliver her first Budget on Wednesday, with widespread expectations of tax increases to address a multibillion-pound spending shortfall. Earlier reports had suggested potential hikes to income tax rates-a move that would have broken Labour's election pledge not to raise basic, higher, or additional rates.
However, government sources indicated last week that Reeves had abandoned the plan following improved economic forecasts. Instead, officials have hinted at extending the freeze on income tax thresholds, which would push more workers into higher tax brackets as wages rise.
Other anticipated measures include freezing rail fares in England for the first time in decades and scrapping the two-child benefit cap-a Conservative-era policy limiting welfare claims to the first two children. The cap's removal, long demanded by Labour MPs, could cost over £3 billion, per the Institute for Fiscal Studies.
Political Divide Over Welfare and Taxation
Conservative shadow chancellor Mel Stride has called for an investigation into the leaks, arguing they have "real-world consequences," including market instability. In a letter to the Treasury's top civil servant, Stride questioned whether ministers authorized the briefings or if unauthorized disclosures occurred.
Labour's John McDonnell, a former shadow chancellor, urged Reeves to pursue a "redistributive Budget," targeting wealthier individuals and corporations. Meanwhile, Green Party leader Zack Polanski hailed the potential cap removal as a "victory" but criticized Labour's delay, advocating for higher taxes on the rich rather than workers.
"The big choice at this Budget is whether the chancellor has the backbone to control government spending, particularly in welfare, and avoid tax hikes that damage the economy."
Mel Stride, Conservative shadow chancellor
Economic and Social Priorities
Reeves has signaled a focus on reducing NHS waiting lists, cutting living costs, and lowering national debt. Alexander emphasized Labour's commitment to tackling child poverty, stating: "One of the defining elements of this government is ensuring children's chances in life aren't determined by their parents' bank balance."
Critics, including Stride, argue that removing the two-child cap raises fairness concerns, as it could incentivize larger families on benefits without similar support for working households. The debate underscores broader tensions over welfare spending and fiscal responsibility as Reeves finalizes her plans.
What to Expect on Budget Day
The Budget, to be unveiled on Wednesday, is expected to balance tax adjustments with targeted relief measures. Analysts anticipate:
- Smaller, targeted tax rises to avoid breaching Labour's manifesto pledges.
- Potential extensions of existing freezes (e.g., income tax thresholds).
- Social policies like the rail fare freeze and welfare reforms.
Reeves' ability to navigate these pressures-while addressing both economic stagnation and internal party divisions-will define the Budget's reception.
