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Rachel Reeves’s recent budget, though positioned as a shift rom conservative austerity, has serious implications for working people. It falls short in key areas, sidestepping progressive taxation on the wealthy and big corporations. While the budget includes some increases in NHS and education funding, the reality is that Reeves’s measures continue to burden working-class families while letting the wealthiest escape largely untouched.
Impact on Wages and Workload
The budget’s increase in employer National Insurance contributions, theoretically aimed at raising funds, is likely to reduce real wages. Paul Johnson of the Institute for Fiscal Studies (IFS) warns that up to three-quarters of this increase may be passed on through lower wages and higher prices, effectively becoming a hidden tax on working people. The Resolution Foundation has also raised concerns that real pay is not expected to grow significantly, meaning wages could remain stuck at 2008 levels until 2029. For many in the workforce, especially those in lower-wage jobs, this translates to a continued squeeze on living standards.
NHS workers, who are already overstretched, were warned by Keir Starmer that they should expect increased workloads. This statement highlights a persistent issue: despite additional funding, the demands on healthcare workers are set to grow without a commensurate increase in resources or support. For unions representing NHS staff, this is an urgent call to advocate for not just funding but also meaningful workforce protections against burnout.
Housing and Cost of Living Pressures
Paul Johnson also cautioned that changes to property taxes would likely drive up rents, disproportionately affecting renters who already face high housing costs. Furthermore, the continued freeze on fuel duties contrasts starkly with public transport fare increases. At a time when other European nations are making public transport more affordable to meet climate goals, Reeves’s approach forces additional costs onto working-class commuters.
Inadequate adjustments to minimum wage levels only exacerbate these pressures. The announced increase still falls short of the Living Wage Foundation’s recommendations, and many unions are demanding a minimum of £15 per hour as a fair wage in the face of rising rent, energy, and food prices. Solidarity and other unions will need to continue pressing for wage increases that genuinely meet the cost of living.
Neglect of Wealth Tax and Corporate Taxation
The budget remains notably lenient on high-income earners and corporations. While Reeves raised capital gains tax slightly, she also reassured investors that it remains the lowest in the European G7. The super-rich continue to pay a lower rate on capital gains than working-class people pay on income—a disparity that could have been addressed by aligning capital gains rates with income tax rates. This approach might have raised £16 billion annually, but Labour has opted for a modest £2.5 billion increase instead.
Unite’s Sharon Graham points out that a mere 1% wealth tax on the richest could yield £25 billion, addressing budget shortfalls without cutting vital social programs. Yet Reeves’s budget does not touch this potential source of funding, favoring a model that keeps the wealthiest shielded from meaningful taxation. For Solidarity members, this is a call to demand fair contributions from the richest to support public services and social welfare.
The budget introduced some positive small measures for working people:
National Living Wage: The National Living Wage will rise by 6.7% to £12.21. For those aged 18 to 20 it will go from £8.60 to £10 an hour, a rise of more than 16% and the largest increase on record. It’s still not enough.
Carer’s Allowance: There will be an increase in the weekly earnings limit to the equivalent of 16 hours at the National Living Wage, meaning a carer can now earn over £10,000 a year while earning carers’ allowance.
Austerity’s Persistence and Union Action
Despite some marginal increases in spending, Labour’s budget holds on to several Tory-era austerity policies, notably in social welfare. Cuts of £3 billion targeting disability benefits and other welfare reforms continue under the guise of “public service reform.” FBU leader Matt Wrack has rightly criticized Labour’s low corporate tax rate, calling it a symptom of a broken economic model that prioritizes profits over people’s needs.
While Labour promises to repeal the Trade Union Act 2016, removing barriers to strike action, the budget reflects a deep-seated reluctance to break with austerity and challenge the interests of the wealthiest. If Solidarity and other unions want a fairer distribution of wealth, this budget makes it clear that pressure and collective bargaining will be essential. It’s time to push for a budget that prioritizes the wellbeing of working people over corporate profits.
This analysis underscores the necessity of a strong, pro-worker response. Together, let’s continue to demand that the burden of economic adjustment falls on those who can afford it—not on workers.
By Maria Camara