Rachel Reeves announces the first Labour budget in 14 years, and the first to be delivered by a female Chancellor.
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Britain voted for change, she says. The government has a mandate to restore stability and start a decade of renewal, she says.
Reeves says Labour must ‘invest, invest, invest’ to promote growth
The only way to deliver growth is to “invest, invest, invest,” she says.
She says Labour has had to renew Britain before, and it will again.
Reeves says she is setting aside £11.8bn to compensate infected blood victim scandals, and £1.8bn for Post Office scandal victims
Reeves says people can see the problems facing public services. She says:
The country has inherited not just broken public finances, but broken public services too.
The British people can see and they can feel that in their everyday lives: NHS waiting lists at record levels, children in portacabins as school roofs crumble, trains that do not arrive, rivers filled with polluted waste, prisons overflowing, crimes which are not investigated and criminals who are not punished.
She says the last government did not provide funds for services, and for things like compensation scheme (for Post Office operators, and for victims of the blood scandal).
She says Rishi Sunak apologised to the victims of the blood scandal. But he did not budget for compensation, she says.
She says she is setting aside £11.8bn to compensate the blood scandal victims, and £1.8bn for the victims of the Post Office scandal.
Reeves says she is maintaining the Bank of England’s inflation target of 2%.
She thanks Bank of England staff for their help.
And she hanks her predecessors for their advice. Kwasi Kwarteng said in a Mail on Sunday article his mini-budget was not perfect. She agrees, she says.
Inflation is now forecast to be 2.5% this year, and 2.6% next year.
She says she is confirming her economic rules.
The “stability rule” means the government will not borrow to fund current spending.
She says the government will meet this in 2029-30, until that is the third year in the forecast, and then that will be the target for three years ahead, she says.
She says the government is forecast to meet this two years early.
This is from Paul Johnson, director of the IFS: “Current budget balance target by 2029-30 and then target 3 years ahead. Sensible. Current forecast is surplus by 27-28. But only by a small margin (<£10bn) in 2029-30”
Reeves reads out the forecasts for borrowing figures: It is due to fall from 4.5% of GDP this year to 2.1% of GDP by the end of the forecast, she says.
And Reeves reads out the growth figures. They show a faster than expected rise this year and next year, but then weaker than forecast growth later in the forecast:
GDP in 2024: +1.1%, up from 0.8% growth forecast at the March budget
GDP in 2025: +2%, up from 1.9% growth forecast at the March budget
GDP in 2026: +1.8%, down from 2.0% growth forecast at the March budget
GDP in 2027: +1.5%, down from 1.8% growth forecast at the March budget
GDP in 2028: +1.5% down from 1.7% growth forecast at the March budget
GDP in 2029: +1.6%, a new forecast
Reeves says she will soon announce the Covid corruption commissioner.
This is the person tasked with recovering money paid for dodgy Covid contracts. There had been talk that the appointment might be announced today.
And she says David Goldstone is being appointed as chair of the new Office for Value for Money she is setting up.
Reeves says crackdown on welfare fraud will save £4.3bn
Reeves says the government will find savings by reforms to the health and disability benefits system.
And there will be “a crackdown on fraud in our welfare system, often the work of criminal gangs”, using “innovative new methods to prevent illegal activity and provide new legal powers to crack down on fraudsters, including direct access to bank accounts to recover debt”.
She says this should save £4.3bn by the end of the forecast period.
There are also measures to get more people into work, she says.
Reeves confirms the increase in the national minimum wage announced yesterday.
Turning to carer’s allowance: She says the government is increasing the amount people can earn before they lose the benefit. It will rise to the equivaleny of more than £10,000 a year, she says. She says this is “the largest increase in carers allowance since it was introduced in 1976”.
She says the government is also reviewing what is happening to overpayments.
Reeves says the state pension will rise by up to £470.
We want to give retired workers the long-term financial security they need.
That’s why in 2025-26 we’re increasing the State Pension by up to £470 in line with the Triple Lock. — HM Treasury (@hmtreasury) October 30, 2024
Reeves says she has decide to continue the freeze in fuel duty. This will cost almost £3bn, she says.
The government will protect working people and those in local communities by freezing fuel duty next year.
This is a tax cut worth £3bn and will save motorists almost £60 a year. — HM Treasury (@hmtreasury) October 30, 2024
Reeves says employers’ national insurance going up to 15%, and threshold falling, raising £25bn a year
Reeves says she is not increasing income tax, employees’ national insurance and VAT.
But she will increaser employers’ national insurance, she says. It will go up by 1.2 percentage points, to 15%, from April next year, she says.
And she says she is reducing the threshold at which it gets paid. This will come down from £9,100 per year to £5,000.
Reeves says this will raise £25bn a year by the end of the forecast period.
This will raise £25bn per year by the end of the forecast period.
Reeves confirms capital gains tax going upThe lower rate will rise from 10% to 18%, and the higher rate will go up from 20% to 24%, she says.
She says this will still be the lowest rate for any European G7 country.
Reeves says stricter rules on inheritance tax will raise more than £2bn
Reeves is now on inheritance tax. She says she is taking “a balanced approach”
First, the previous government froze inheritance tax thresholds until 2028. I will extend that freeze for a further two years until 2030 that means the first £325,000 of any estate can be inherited tax free, rising to £500,000 pounds if the estate includes a residence passed to direct descendants and £1 million when a tax free allowance is passed to a surviving spouse or civil partner.
Second, we will close the loophole created by the previous government made even bigger when the lifetime allowance was abolished by bringing inherited pensions into inheritance tax from April 2027.
Finally, we will reform agricultural property relief and business property relief from April 2026. The first £1m of combined business and agricultural assets will continue to attract no inheritance tax at all. But for assets, but for assets over £1m inheritance tax will apply with a 50% relief at an effective rate of 20%,
This will ensure that we continue to protect small family farms and three quarters with three quarters of claims unaffected by these changes.
I can also announce that we will apply a 50% relief in all circumstances on inheritance tax for shares on the alternative investment market, and other similar markets, setting the effective rate of tax at 20%.
Reeves says these changes will raise over £2bn by the end of the forecast period.
Reeves turns to air passenger duty.
There will be a small adjustment, worth no more than £2 for economy, short-haul flights.
But there will be a different approach for private jets. Their air passenger duty will rise by 50%, she says.
Making a joke about Rishi Sunak, she says this would be the equivalent of £450 per passenger for a flight to California.
Reeves says the government is going ahead with the pledge to abolish non-dom status.
Those that make the UK their home should pay their taxes here.
That is why we are removing domicile status from the tax system from 6 April 2025 & creating a simpler residence based regime, designed to bring the best talent & investment to the UK. — HM Treasury (@hmtreasury) October 30, 2024
To help high streets there will be a 40% relief on business rates for retail, hospitality and leisure.
And she says she is cutting the duty on draft alcoholic drinks by 1.7 percentage points.
Blick Rothenberg, the audit, tax and business advisory firm, point out that Rachel Reeves has announced the largest tax-raising budget in decades.
Simon Gleeson, a partner at Blick Rothenberg, says: “£40bn in tax raises is the largest any chancellor has made since Norman Lamont in 1993, at £38.5bn (Conservatives), and Dennis Healy at £31.4bn in 1975 (Labour).”
Reeves says freeze in income tax and national insurance thresholds will not be extended, contrary to some pre-budget reports
There was speculation that Reeves would extend the fresh on income tax and national insurance put in place by the last government. But Reeves has decided not to, she says.
The previous government froze income tax and National Insurance thresholds in 2021 and then they did so again, after the mini budget, extending their threshold freeze for a further two years …
Having considered this issue closely, I have come to the conclusion that extending the threshold freeze would hurt working people would take more money out of their pay slips. I am keeping every single promise on tax that I made in our manifesto. There will be no extension of the freeze in income tax and national insurance thresholds beyond the decisions by the previous government.
From 2028-29, personal tax thresholds will be uprated in line with inflation once again.
On spending:
Day-to-day government spending will rise by 1.5%.
And spending including capital spending will rise by 1.7% in real terms, she says.
At the election, we promised there would be no return to austerity today, we deliver on that promise.
Reeves announces £1bn increase in special educational needs funding and is tripling investment in breakfast clubs, an increase of 6% year on year, she says.
Reeves confirms MoD spending is going up by £2.9bn.
There will be another £2m for Holocaust education, she says.
And there will be an extra £1.3bn for councils, including at least £600m for social care and £230m to to tackle homelessness and rough sleeping.
Reeves says, in line with the Barnett formula, there will be an extra £3.4bn for the Scottish government, an extra £1.7bn for the Welsh government and an extra £1.5bn for Northern Ireland.
And the Welsh government is getting £25m to help fund the maintenance of coal tips, she says.
Reeves confirms debt definition is changing, but says four ‘guardrails’ will ensure extra borrowing is responsible
Reeves says, under the Tories, public investment was set to fall from 2.5% of GDP to 1.7% of GDP.
She says her new debt rule – called the investment rule, because the definition of debt is changing to allow more investment – will address this.
She confirms that the government will move to public sector net financial liabilities as the debt measure. This is a metric that has been measured since 2016, she says.
She says four “guardrails” will be in place.
First, our portfolio of new financial investments will be delivered by expert bodies like the National Wealth Fund, which must, by default, earn a rate of return at least as large as that on gilts.
Second, we will strengthen the role of institutions to improve infrastructure delivery.
Third, we will improve certainty setting capital budgets for five years and extending them at every spending review every two years.
Finally, we will ensure that there is greater transparency for capital spending with robust annual reporting of financial investments based on accounts audited by the National Audit Office and made available to the office for Budget Responsibility at every forecast.
Taken together with our stability rule, these fiscal rules will ensure that our public finances are on a firm footing, while enabling us to invest prudently.
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Rachel Reeves first Labour Budget in 14 years in detail