Britain's Labour government delivered its maiden budget on Wednesday, which included major tax hikes and increased borrowing to meet Prime Minster Keir Starmer's mission of firing up the economy.

Finance minister Rachel Reeves said she had to make "difficult decisions" in the budget, as the centre-left government focused in on long-term growth over short-term wins. 

While some have praised the government's decision to invest in public services, others are fearful of the consequences of higher borrowing and taxes.

What makes this budget different?

It was the first Labour budget in nearly 15 years, after the party won a landslide election in July ending years of Conservative rule.

In her budget speech, Reeves announced major tax hikes to raise £40 billion ($52 billion) -- the biggest increase in 30 years, according to analysts. 

According to the Office for Budget Responsibility, the government's fiscal watchdog, tax as a share of gross domestic product will be at a "historic high" of 38.3 percent in 2029-2030. 

That's up from 36.4 percent of GDP in 2024-2025, the OBR said. 

Labour insisted these increases were necessary to fix a "black hole" in public finances left by the previous Tory government, as it faced a period marked by Brexit, the Covid pandemic and an energy crisis. 

Reeves also made a change to fiscal rules by altering the way debt is calculated in the budget to allow her to borrow more to invest in infrastructure and public services.

Who will pay?

Employers are targeted in the budget's flagship measure -- an increase to employers' national insurance contributions -- which is set to bring in £25 billion.

The government has consistently committed to not raising taxes on "working people", and avoided increasing income taxes, employee national insurance charges, or value added tax.

However, according to the OBR, the tax increase on employers will likely be passed on to employees via lower salaries and fewer pay rises.

The wealthiest were also targeted in the budget, with increased taxes on second homes, private school fees and capital gains. 

A 50 percent increase in private jet taxes is set to raise over £500 million from 2026.

How have people reacted?

Outgoing Tory leader Rishi Sunak, Britain's former prime minister, said the budget contains "broken promise after broken promise". 

"This is a tough budget for business," said Rain Newton-Smith, the chief executive at Britain's main business lobby group CBI.

She noted however that the chancellor had "difficult choices to make to deliver stability for the economy and public finances". 

Paul Nowak, leader of the Trades Union Congress, was more positive, saying "this budget sets us on an urgently needed path towards national renewal.”

"The chancellor was right to prioritise hospitals and classrooms over private jets," he said.

In the British press, the budget has been called a "Halloween horror show" and a "nightmare in Downing Street". 

Will it work?

For Paul Johnson, director of think tank the Institute for Fiscal Studies, the chancellor is making two risky choices in the budget. 

The first risk is that the injection of cash will be enough to fix public services over the next two years, and the second is that the benefits of borrowing will offset the costs. 

The markets, however, are uncertain. 

The pound did not plummeted on the announcement of tax increases, as investors had already anticipated tax hikes ahead of the budget. 

But the UK's 10-year borrowing rate reached its highest level since November 2023 on Thursday, on fears of resurgence in inflation. 

The OBR revised upward its growth forecasts for 2024 and 2025 but has downgraded them beyond that.