Middle-class Britons will suffer £2,000 Budget hit as Rachel Reeves battles to keep Labour MPs on her side

Ahead of last year's sweeping landslide election victory, Labour promised in its manifesto not to raise taxes on "working people", including National Insurance (NI), income tax and value-added tax (VAT).

But when she rises to speak at the dispatch box tomorrow afternoon, Ms Reeves will be forced to announce billions of pounds worth of punishing taxes, on top of £40billion of tax rises announced in her first Budget last year, to offset the Office for Budget Responsibility's (OBR) downgraded growth forecasts.

She recently told the Cabinet the UK faces a £100billion "black hole" over the next five years amid concerns ministers have failed to grasp the full scale of the Treasury's fiscal deficit, with a recent YouGov survey revealing 0 per cent of the public felt the UK economy was in "a very good state".

Headline tax rises set to be unveiled by Ms Reeves tomorrow include:

• An extended freeze on income tax thresholds, first introduced in 2022 by Rishi Sunak, for two more years;
• A £2,000-a-year cap on salary sacrifice schemes allowing workers to make pension contributions without paying NI, with wealth managers warning the measure will target parents’ long-term savings to the tune of £300;
• A pay-per-mile scheme for electric cars costing electric vehicle (EV) owners an estimated £250 per year;
• A "mansion tax" on properties valued at more than £2million, hitting homeowners £2,000 each on average;
• An increase in duties bookmakers and casinos pay to the Treasury, which industry insiders warn will lead to casino closures and job losses;
• A cut in tax breaks for consumers purchasing expensive bicycles through the Cycle to Work scheme;
• A "tourist tax" on overnight stays in English cities, which could add up to £50 to a family’s staycation bill due to the increased cost of taxi rides and hotel lets;
• A "milkshake tax" on pre-packaged milk-based drinks, including coffee-shop lattes.

According to research by Quilter, the freeze on income tax thresholds is expected to cost a family with one adult earning £60,000 a year and another on £40,000 nearly £1,300.

Meanwhile, the Resolution Foundation — a leading left-wing think-tank which until last year was led by Torsten Bell, Parliamentary Secretary to the Treasury — slammed the minimum wage hike.

Its principal economist Nye Cominetti said: "These steep increases risk causing more harm than good if they put firms off hiring."

Elsewhere in her Budget, Ms Reeves will announce a freeze in fuel duty for the 15th consecutive year, a 4.1 per cent rise in the National Living Wage to £12.71 an hour, and a £170 fall in energy bills by the end of the decade by slashing green levies.

And amid weeks of damaging leaks and internal briefings, which saw No 11 abandon plans for the first increase in income tax rates since 1975, Ms Reeves is expected to scrap the two-child benefit cap and uprate benefits in line with inflation.

Ms Reeves will tell MPs she has made "fair and necessary" choices, saying: "I will not return Britain back to austerity, nor will I lose control of public spending with reckless borrowing. I will take action to help families with the cost of living ... cut hospital waiting lists ... cut the national debt."

But Sir Mel Stride, the shadow chancellor, branded the package the "dirty dozen", saying: "Working people can see the truth. It looks as though this Budget will dodge all the tough choices, punish those who play by the rules, and proves Labour still can’t be trusted with the nation’s finances."

Speaking to a meeting of Labour's Parliamentary Party on Monday, Ms Reeves warned peers they must "stick together" if they wanted to win the next election amid the threat of Nigel Farage’s Reform UK.

In a recent Ipsos poll, Ms Reeves recorded the lowest popularity rating of any Chancellor in recorded history amid the context of persistent economic anxiety, high inflation and low growth.

Graham Stringer, the Labour MP for Blackley and Middleton South, described the run-up to the Budget as "chaotic".

He said: "It’s the worst preparation for a Budget I have ever seen. I don’t think it will be a Budget for growth, which is what the country needs."

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