Rachel Reeves accused of breaking election promises with £40bn tax raid

Rachel Reeves delivered the highest tax hike in history with an eye-watering £40 billion raid on the nation in a Budget of "broken promises".

The Chancellor hammered families and businesses with a series of punishing measures that will fund a billions more for the NHS.

But taxpayers face more pain to come with the high-tax, high-spend, big borrowing plan expected to push up inflation and mortgage costs.

Meanwhile, economic growth is also expected to be sluggish for the next four years.

Furious Tories accused the Chancellor of misleading the public with its election pledge ruling out surprise tax rises.

Ex-prime minister Rishi Sunak said: "It's a classic Labour agenda - higher taxes, higher borrowing, no plan for growth and working people paying the price."

Despite axing winter fuel cuts for 10 million pensioners to help plug a supposed £22 billion blackhole, analysis by the independent Office for Budget Responsibility did not back up the claims.

Mr Sunak said the figure was "fictional", adding it was "deeply, deeply disappointing" that Ms Reeves had tried to politicise the independent OBR.

The Chancellor changed debt rules to allow her to borrow up to £74 billion over the coming years for investment in infrastructure.

Mr Sunak accused Ms Reeves of "fiddling the figures".

He added: "She specifically told the British people she wouldn't change the debt target because, and I quote she said, 'I'm not going to fiddle the figures to get better results'.

"But that is exactly what she has done.

"She has gone back on her word and fiddled the figures so that she can borrow billions more. Broken promise after broken promise, and working people will pay the price."

During the election campaign, Sir Keir Starmer said Labour's plans were "fully-costed, fully-funded".

"They do not involve tax rises over and above the ones that we've set out in," he added.

Over the course of one hour and 17 minutes, Ms Reeves set out a series of hikes including an increase in the amount of national insurance employers pay and the point at which it kicks in to claw in £25 billion.

More families will be hit by freezes on inheritance tax thresholds and pensions will no longer be counted as part of an estate.

Exemptions allowing farms to be passed through families will be so severely restricted that critics claimed children will be forced to sell up once they inherit.

Labour campaigned in the election on a promise of economic growth and a pledge to restore faith in politics.

Dame Harriett Baldwin, former Treasury minister, said the Budget was a "dreadful thing to do in terms of trust in the electorate".

Labour also promised to protect "working people" in its plans, but experts warned the hike in national insurance contributions paid by employers is likely to reduce wages and lead to job losses.

The overall tax burden will reach a record 38.3% of gross domestic product in the next three years, the highest since 1948 as the UK recovered from the impact of the Second World War.

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."

John O'Connell, chief executive of the TaxPayers' Alliance, said: "We were consistently told that there was no need for big tax hikes because of a focus on growth, so taxpayers will be disgusted by the whoops and cheers of Labour MPs celebrating the fact that Rachel Reeves has just condemned the country to a record high tax burden.

"Given wider global uncertainties the stakes are incredibly high, yet we've doubled down on disastrous managerialism and decline. That means growth will flatline over the next five years, which is unsurprising given the assault on aspiration and wealth creation we've just witnessed."

Laith Khalaf, head of investment analysis at AJ Bell, said "make no mistake this was a bleak budget for taxpayers".

Think tank Onward's Director Sebastian Payne said: "This was a bad Budget for both trust in politics and small businesses. Labour was given a mandate for 'change' and the wide-ranging increases in tax announced today will do little to deliver what people wanted, or help employers."

Paul Johnson, director of the Institute for Fiscal Studies, said Ms Reeves was taking two big "gambles" - hoping a big cash injection for public services will turn around performance as well as hoping that the extra borrowing she plans will be worthwhile.

He said if the plan does not work out "she may well need to come back with another round of tax rises in a couple of years' time".

James Vitali, head of political economy at Policy Exchange, said: "This Budget tilts resources away from the wealth-creating parts of our economy towards the public sector.

"It will be the working people of the UK who will suffer in the form of lower wage growth and higher tax bills."

Reform UK deputy leader Richard Tice said: "This budget is an assault on working people, an assault on growth and an assault on hard work.

"Thanks to this budget, we are all getting poorer: Per person, per family, per small business, per community.

"Labour have failed working people with this budget, they came into office promising change, growth and no tax rises on working people.

"What we have instead is the same old Labour: higher taxes, more borrowing and lower

growth. This budget hurts hard working British people."