Britain's new finance minister Rachel Reeves announced the largest tax increases in more than three decades in her first budget on Wednesday. 

Insisting that she had to repair the country's broken public services with increased spending, Reeves paved the way for higher borrowing for investment.

Reeves' mantra, taken up during the long build-up to July's general election has been "restoring economic growth is now our national mission."

She has pledged to boost an economy hit by the 2007-09 financial crisis, Brexit, COVID and soaring energy prices.

A former Bank of England economist, Reeves is the UK's first female Chancellor of the Exchequer. 

Rewriting her fiscal rules to give her leeway to meet the ruling Labour Party's manifesto commitments, Reeves announced tax rises of 40 billion pounds ($52 billion) a year and blamed the outgoing Conservatives for leaving her with a budget "black hole".

Her plans, which include the largest tax rises in a UK budget since those announced by Norman Lamont in 1993, will take the government's tax take to a historic high of 38.2 percent of economic output by 2030. While lower than in many other European economies, it's an increase from 36.4 percent now and more than five percent higher than before the COVID pandemic.

According to the Institute for Fiscal Studies (IFS), the UK's leading independent economics research institute, the rises are equivalent to 1.25 percent of economic output.

What specific measures did Reeves announce?

Taxes:

• Businesses' social security contributions to rise by 1.2 percent to 15 percent.

• Reduced threshold at which businesses start paying national insurance social contributions on each workers' salary from £9,100 ($11,797) per year to £5,000 ($6,489).

• National minimum wage to increase by 6.7 percent.

• Employment allowance (the amount where workers are untaxed) increased to £10,500 ($13,629) from April 2025.

• Inheritance tax threshold freeze extended until 2030, while inheritance tax relief for companies and farms limited to £1 million ($1.29m)

• Non-dom exemptions that let wealthy, often foreign residents, avoid tax on overseas income, closed. 

• Capital gains tax will rise on most assets, from 10 percent to 18 percent at the lower rate, and from 20 percent to 24 percent for higher earners.

• Temporary five-pence cut in fuel duty remains in place.

• Stamp duty tax paid on second house purchases to increase by 2 percentage points to 5 percent.

• Business rates relief on private schools removed from April 2025, and 20 percent VAT on school fees from 1 January 2025.

• Levy on vapes, increased in line with tobacco tax.

Government spending (main points)

• Spending on state-run health services to increase by £22.6 billion ($29.34bn). 

• Pledge for £100 billion ($129.79bn) in capital spending over five years.

• Education department will receive £6.7bn ($8.7bn) of capital investment, a 19 percent increase. Schools budget will increase by £2.3bn ($2.98bn) to support the hiring of teachers. There will be £2.1bn ($2.73bn) for school maintenance and a £1bn ($1.29bn) increase in funding for special educational needs.

• £5bn ($6.49bn) on housing investment in 2025-26, including increasing the supply of affordable housing.

• £2.9 billion ($3.76bn) funding for 2025 for Britain's armed forces.

• Pledge extended to provide Ukraine with £3 billion ($3.89bn) a year.

• £1.8 billion ($2.34bn) in compensation for Post Office scandal victims. 

• £1.3bn ($1.69bn) for additional grant funding for local government.£500m (649m) increase in the roads budget next year to target potholes.

What has been the reaction?

"This is a tough budget for business." - Rain Newton-Smith, Confederation of British Industry (CBI) chief executive

"It's likely that gilt and equity markets will view the package as not as bad as it could have been. But with the investment plans being long-term in nature, it doesn't feel like a budget for growth" - Neil Birrell, Chief Investment Officer with Premier Miton Investors

"Business leaders can only hope that this is a big bang now, to wipe the slate clean, and that there will be no further shocks of this magnitude in the lifetime of this parliament, enabling business to plan with more confidence." - Institute of Directors policy director Roger Barker

"Many people thought this was a new Labour prospectus, not a traditional tax and spend prospectus, and they have woken up to a Chancellor who has given us the biggest tax-raising Budget in history." - Jeremy Hunt, Shadow Chancellor 

"The change of threshold so employers now start paying National Insurance at £5,000 not £9,100 is big. For the employers who pay it, at the new 15 percent rate that alone's £615 increased cost per most employees per year." - Martin Lewis, leading UK financial commentator 

"Following months of leaks and speculation, markets seemed somewhat exhausted leading into today's budget, and the initial positive reaction perhaps reflected that the chancellor was taking a fiscally tighter approach than she could have done." - Jonathan Unwin, UK head of portfolio management at Mirabaud Wealth Management

"Bond markets are forward looking and had already priced in the expected increase in government debt." - Hal Cook, senior investment analyst at Hargreaves Lansdown

"The Budget gave little in the way of using green tax incentives to promote high-growth green technologies. With competition fierce for attracting new growth industries, outsmarting rather than outspending our competitors means making better use of our tax system." - CBI statement   

"The last government must take a lot of the responsibility. Its spending plans for this year and for the future lacked credibility. To cut £20bn from employee National Insurance last year in the face of known fiscal pressures was not responsible." - IFS Director Paul Johnson  

"We support the envisaged reduction in the deficit over the medium term, including by sustainably raising revenue." - International Monetary Fund (IMF)