'I am asking everyone to make a contribution'

Rachel Reeves sets out plans to raise £26bn in slew of tax increases | Chancellor targets wealthy but income tax thresholds frozen again | Two-child benefit cap is lifted and energy bills cut to ease cost of living.

- Heather Stewart, Jessica Elgot

Rachel Reeves targeted Britain's wealthiest households yesterday with a £26bn tax-raising budget to fund scrapping the two-child benefit policy and cutting energy bills.

On a chaotic day when details of her budget were accidentally released early by the Office for Budget Responsibility (OBR), the chancellor defended the measures by saying she was "asking everyone to make a contribution to repair the public finances", but that she wanted the wealthiest to pay the most.

Reeves insisted she had avoided reckless borrowing and dangerous cuts in a budget that will push the tax take to an all-time high of 38% of GDP in five years' time.

More than 1.7 million workers will be dragged into either paying tax for the first time or pushed into a higher band by an additional three-year freeze on income tax and national insurance thresholds - which Reeves conceded would hit "working people" but bring in £12.4bn by 2030-31. Some Labour MPs privately expressed alarm at the extent to which the budget would hit the so-called "squeezed middle", including more nurses, teachers and police officers paying higher-rate tax.

Almost one in four taxpayers, 24%, will be paying the higher or additional rates in five years' time as a result of extending the threshold freeze, a process known as "fiscal drag".

The OBR said the threshold freeze would bring an additional 780,000 people into paying the basic rate of income tax; 920,000 into paying the higher rate; and another 4,000 into the additional rate.