by Rachel Reeves is set to use one of the most important budgets in recent memory to ask businesses to pay more tax to help rebuild the NHS, amid warnings the health service has been left with a £9bn hole in its finances.
The chancellor is expected to apply his reputation to a tax hike budget designed to reset the public finances. She has already had to deal with cabinet leaks regarding the disclosure of funding alongside the statement. However, Reeves is understood to believe the public will accept a multi-billion pound hike in business taxes if it involves fixing the health system’s finances.
The Observer new research appears, commissioned ahead of the budget by an influential think-tank with close links to the Treasury and No. the NHS.
Seven in ten voters said they would approve the move if the money raised was used to increase spending on the health service, according to a poll of more than 6,000 people commissioned by Labor Together.
Only 18% said they agree. This measure was very popular with a key group who switched from the Conservatives to Labor in the last election. About 82% of the group said they approved of it.
The news comes with sources warning that the NHS needs an extra £9bn this financial year just to stand still, compared to the arrangement it left with the previous government.
The figure includes around £4bn in pay increases agreed by Reeves and the health secretary, Wes Streeting, following recommendations from the independent public sector pay body. The rest comes from the 2.9% rise that is simply needed to keep the NHS performing at its current level as demand grows.
Sources across Whitehall said Reeves was putting the NHS front and center in what is shaping up to be one of the most consequential budgets in recent years.
“The Conservatives crashed the economy and then ran away, leaving the NHS with spending plans that were complete fiscal fiction,” said a Treasury source.
Reeves had to unveil the budget along with agreeing immediate spending plans for government departments, a process which led to a major fallout among some cabinet ministers last week.
Some MPs remain fearful of what would happen to unprotected departments, and worry that the Treasury, desperate to find savings, could opt to reduce the taxpayer subsidy applied to rail fares. This would increase ticket prices and undermine Labour’s argument that they want to tackle the cost of living crisis.
Government figures said it was now important to show people that tax increases were needed to reset the public finances and rebuild the health service. “We have to clear the decks,” said a source. “This is about exposing the true state of public finances and how we begin to fix them.”
While Reeves appears more than ever to sell an increase in employer NICs as a significant element of the health service recovery, she has already faced accusations of breaking Labor’s manifesto promises by using a series of tax rises to fund the strengthen public.
The Tories say a multi-billion pound increase in employer NICs, as well as a £7bn two-year freeze on income tax thresholds, would defy Labour’s election manifesto.
However, government sources insist that both measures fulfill the party’s pledge not to raise VAT, income tax or national insurance on “working people”. A Treasury source said: “We don’t comment on tax speculation.”
A flurry of potential tax rises, including cuts to inheritance tax allowances and higher capital gains tax on share sales, come amid signs that Labor is losing its grip as the party seen as the most better to handle the economy.
Related: Budget 2024: what taxes could Rachel Reeves raise?
The latest Opinium poll for the Observer Labor shows little chance of improving voters’ finances. He gave the Tories 6 percentage points on the issue in July, but now trails the party by a point. It also trails the Conservatives by 1 point on “running the economy”, having led by 9 points after the election.
However it is still at the forefront of improving public services, spending government money effectively and reducing the national debt and deficit.
“Labour’s honeymoon is long over, but the chances of the budget turning things around look slim unless there is a strong rabbit to pull out of the hat,” said James Crouch, head of policy and public affairs. at Opinium. “The government should expect a turbulent few weeks.”
There is speculation that the NHS will receive increases in real terms of between 3% and 4%, although officials would not be drawn on the figure.
Siva Anandaciva, chief analyst and interim director of policy at the King’s Fund, said it was vital that higher funding came alongside serious reform. “It is unlikely that any government would be able to give the NHS ‘enough’ at the moment to cope with all the serious funding pressures that have come up in recent years,” he said.
“It would be a significant increase in funding of 4% above inflation compared to the years of austerity the NHS has endured over the past decade.
“Many agree that the NHS needs to reform and modernize the way it works. So, even if the funding on the table is unlikely to be ‘enough’, the government will have to show that the additional investment it is providing – at no small political cost if this funding comes in part from higher taxes – being used to support it. reforms to how the NHS works, rather than just paying for more of the same.”
