Rachel Reeves makes big income tax announcement in Budget of tax rises and big increases in public spending

Her plans will see the tax burden reach an historic high, while borrowing increases by an average £32.3 billion a year as spending increases by around £70 billion annually over the next five years.

Ms Reeves said the measures were necessary to address the “black hole” in the public finances left by the Tories while pumping billions into schools and hospitals.

The Chancellor revealed that the Office for Budget Responsibility said that the previous Tory government did not provide the watchdog “with all the available information to them”, and added that “undisclosed spending pressures have since come to light”.

While much of the Budget was briefed out in advance, the Leeds West and Pudsey MP did save surprises for the despatch box.

These included keeping the fuel duty freeze, cutting the levy on draught beer and also ending the Conservatives’ freeze on tax thresholds.

The OBR previously calculated that this freeze, known as “fiscal drag”, will raise £44.6 billion by 2028-29, by pulling millions of people into higher rates.

Ms Reeves announced that from that year, income tax thresholds will once again be uprated in line with inflation.

She said: “Extending their threshold freeze for a further two years raises billions of pounds – money to deal with the black hole in our public finances and repair our public services.

“Having considered the issue closely, I have come to the conclusion that extending the threshold freeze would hurt working people. It would take more money out of their payslips.

“I am keeping every single promise on tax that I made in our manifesto. So there will be no extension of the freeze in income tax and National Insurance thresholds beyond the decisions of the previous government.”

However, the Chancellor was warned that by lowering inheritance tax reliefs for the agricultural sector, risks the “end of family farming as we know it”.

Ms Reeves announced that 100 per cent agricultural property relief and business property relief, which allow family farms to be passed down generations, would end at £1 million, and sit at 50 per cent thereafter.

The Country Land and Business Association, based in North Yorkshire, has estimated that these measures will impact 70,000 farms across the country “damaging family businesses and destabilising food security”.

CLA President Victoria Victoria Vyvyan said: “This puts dynamite beneath the livelihoods of British farming, and flies in the face of growth and investment. 

“In its attempts to raise more revenue the government will cause great damage, jeopardising the future of rural businesses up and down the country.

 “Many farmers, operating on slim margins, will now face having to sell land to pay inheritance taxes. At a time of profound change in the industry, adjusting to new agricultural policies, the government is offering no vision for a positive economic future for us in the rural community.”

While Keighley and Ilkley MP Robbie Moore said: “Labour’s attack on farmers in the Budget is devastating. 

“It risks the end of family farming as we know it. Labour has just failed rural Britain.”

Ms Reeves confirmed plans to hike employers’ national insurance contributions and increase capital gains tax, while also making changes to stamp duty.

And changing the way government debt is measured allowed her greater flexibility to borrow, resulting in what the OBR called “one of the largest fiscal loosenings of any fiscal event in recent decades”.

The tax burden will reach 38.3 per cent of gross domestic product (GDP) in 2027-28, the highest since 1948 as the UK recovered from the impact of the Second World War.

Concluding her Budget, Ms Reeves said: “This is a moment of fundamental choice for Britain.

“I have made my choices. The responsible choices. To restore stability to our country. To protect working people.

“More teachers in our schools. More appointments in our NHS. More homes being built.

“Fixing the foundations of our economy. Investing in our future. Delivering change. Rebuilding Britain.”