Chancellor Rachel Reeves promised short-term pain for long-term gain – and it looks like we’re in for a rocky road

The Chancellor has completed the announcement she has been waiting 16 long weeks for, and which she claims will begin to deliver the changes people voted for. But at a very affordable price.

Headline: Historic tax rise – £40 billion raised. Of this, £25 billion will come from businesses paying more for each employee they hire.

The way she did this, by significantly lowering the salary threshold at which employers’ national insurance kicks in – from £9,100 to £5,000 – will hit companies that employ the lowest paid workers. Small businesses will receive more significant benefits.

The Chancellor has acknowledged that this huge measure will have an impact far beyond business, and the budget regulator confirms this by predicting that 60% of the costs of the policy will be passed on to workers and consumers through lower wages and higher prices.

Those working people who were promised by the Chancellor and Prime Minister will feel better in five years.

Follow the latest: Largest tax budget since 1993

It was budget clear policy choice – a sharp £22 billion increase in day-to-day NHS spending this year – the government will want to make sure it is spent well and waiting lists will shrink as a result.

And higher still are capital gains tax, inheritance tax, private school tuition fees and reductions in the right to buy discounts.

The Tories will largely see this as a class war, with the chancellor saying it is about the government making “the right choices” and urging her opponents to say they will cut instead.

Rachel Reeves spent much of the start of the statement accusing the Tories of hiding a spending “black hole” and then calling an election to avoid the difficult political choices needed to fill it.

The Office for Budget Responsibility confirms they don’t believe they had the full picture and their spending forecast for March was “too optimistic.”

More details from the budget:
Key announcements
Chancellor hopes to raise £40bn in taxes
The minimum wage will increase by almost 7%

The government will say the chancellor’s claim that tax rises were not tracked during the election campaign was an excuse for not knowing how bad things were.

But it is clear that the scale of tax rises deviates significantly from what Labor set and cannot be entirely attributed to the forecasts.

Among the tax rises that were predicted but failed to materialize were no further freeze on income tax bands beyond 2028, as well as an unexpected continuation of the fuel duty deferral and a cut in draft beer duty – perhaps with tabloid headlines about pints and in mind. van drivers. .

The constant refrain was tough decisions, but “no return to austerity.”

The chancellor was determined to show anxious Labor MPs and undecided voters that her painful tax cuts would mean tangible, visible improvements to public services rather than a repeat of the 2010 coalition government’s cuts.

With the exception of the NHS and school increases this year, day-to-day spending is rising but still constrained. It will increase by 1.5% next year, meaning difficult calculations for vulnerable departments such as local government, justice and social security.

All this is financed not only by tax rises, some of which voters believe were not set out in the manifesto; but also higher borrowing under its rewritten debt rules.

Labor hailed economic growth as the savior of jobs and public services; but the outlook in this regard looks anemic, with growth rates set to decline in three of the next five years.

The Chancellor has promised short-term pain for long-term gain, but with forecasts like these, the next few years could still be bumpy.