(Corrects paragraph 18 to show the extension of the income tax threshold freeze is for three years, not two years)
By Andy Bruce and David Milliken
LONDON (Reuters) -British finance minister Rachel Reeves delivered a budget on Wednesday that will take more tax from workers, people saving for a pension and from investors to give herself more room for meeting her borrowing targets.
The country’s fiscal watchdog, the Office for Budget Responsibility, cut its forecasts for growth in the British economy over the coming years.
But in a figure closely watched by investors assessing Britain’s borrowing risks, the OBR said the government will now have more than double its previous buffer for meeting its fiscal targets even as it raises spending on welfare.
This result was in large part due to more than 26 billion pounds ($34.4 billion) of fresh tax rises which come just over a year after Reeves ordered 40 billion pounds of tax hikes – the biggest since the 1990s. She had promised last year’s rises would be a one-off.
“No doubt, we will face opposition again. But I have yet to see a credible, or a fairer alternative plan for working people,” Reeves said to cheers from Labour Party lawmakers in parliament.
“I am asking everyone to make a contribution, but I can keep that contribution as low as possible because I will make further reforms to our tax system today to make it fairer and to ensure the wealthiest contribute the most.”
BORROWING COSTS FALL
British government bond yields – which are sensitive to concerns about higher borrowing – were lower at 1340 GMT than they were before the OBR report was published in error ahead of Reeves’ annual tax and spending speech to parliament.
The fall in borrowing costs suggested investors were largely comfortable with the budget plan.
The value of sterling rose against the U.S. dollar and the euro.
The unprecedented early release, which was first reported by Reuters, revealed the key announcements from the budget on taxes, economic growth and individual policy changes.
Reeves had promised to take “fair and necessary choices” to improve the country and speed up economic growth but she recognised the unhappiness among voters.
Although Britain’s next national election is not due until 2029, the authority of Reeves and Prime Minister Keir Starmer has been questioned within the centre-left Labour Party.
The OBR said the headroom – the amount of extra spending or tax cuts possible for the government while staying within its budget rules – now stood at almost 22 billion pounds ($28.9 billion) in five years’ time.