CHANCELLOR Rachel Reeves set out a Budget which will increase taxes by £40billion as she promised to "fix the foundations" of the economy and repair the public finances.

In the first Labour Budget since 2010 – and the first to ever be delivered by a woman – Reeves promised to "invest, invest, invest".

But she said the "black hole" left by the Conservatives requires tens of billions of additional taxes.

The Chancellor said: "Together, the black hole in our public finances this year, which recurs every year, the compensation payments which they did not fund and their failure to assess the scale of the challenges facing our public services means this Budget raises taxes by £40 billion.

"Any Chancellor standing here today would face this reality. And any responsible Chancellor would take action.

"That is why today, I am restoring stability to our public finances and rebuilding our public services."

She confirmed a £25bn raid on employers’ national insurance contributions, with higher rates and a lower starting threshold.

The rate will increase by 1.2 percentage points to 15% from April 2025, with payments starting when an employee earns £5000, down from the current £9100.

Reeves said: "I know that this is a difficult choice. I do not take this decision lightly."

A flat rate of duty will be applied on all vaping liquid from October 2026 alongside an additional one-off increase in tobacco duty to encourage people to give up smoking while the soft drinks industry levy will be increased to account for inflation.

While alcohol duty rates on non-draught products will increase in line with RPI inflation, draught duty will be cut by 1.7%, knocking a penny off a pint in the pub.

Reeves confirmed the government will abolish the non-dom tax regime from April 2025.

She said: "In our manifesto we made a number of commitments to raise funding for our public services.

"First, I have always said that if you make Britain your home, you should pay your tax here.

"So today, I can confirm, we will abolish the non-dom tax regime and remove the outdated concept of domicile from the tax system from April 2025."

Reeves has also cemented into her Budget the policy to apply VAT to private school fees from January 2025.

She told the Commons: "94% of children in the UK attend state schools.

"To provide the highest quality of support and teaching that they deserve, we will introduce VAT on private school fees from January 2025 and we will shortly introduce legislation to remove their business rates relief from April 2025, too.

"We said in our manifesto that these changes, alongside our measures to tackle tax avoidance, would bring in £8.5bn by the final year of the forecast.

"I can confirm today that they will in fact raise over £9bn to support our public services and restore our public finances.

"That is a promise made and a promise fulfilled."

However, Reeves confirmed there will be no rise in income tax, national insurance or VAT. 

There will be a National Living Wage increase of 6.7% to £12.21 an hour, while the National Minimum Wage for 18-20 year old will rise to £10 an hour in a move towards a single adult rate. 

Reeves said: "I know that for working people up and down our country, family finances are stretched and pay checks don’t go as far as they used to.

"For the first time, we will move towards a single adult rate, phased in over time, by initially increasing the National Minimum Wage for 18-20 year olds by 16.3% as recommended by the Low Pay Commission, taking it to £10 an hour."

The state pension will rise by 4.1% in 2025-26 meaning more than 12 million pensioners will gain up to £470 next year. 

Working age benefits will also be uprated in line with CPI at 1.7%. 

Reeves said it would be the "wrong choice" to increase fuel duty next year, saying she would continue the freeze and maintain the temporary 5p cut for another year. 

She added: "There will be no higher taxes at the petrol pumps next year."

Through the Barnett formula, Scotland will get an extra £3.4bn, the largest real-terms funding amount since devolution which Reeves said "must now be spent effectively to improve public services in Scotland".