Chancellor Rachel Reeves says her budget will raise taxes by £40 billion as she delivered Labour’s first Autumn statement in 14 years.
In her opening speech, she said “change must be felt”, and the only way to drive economic growth is to invest.
“There are no shortcuts and to deliver that investment is to restore stability and turn the page on the last 14 years,” she began.
“In July, I exposed a £22 billion black hole, a series of promises they had made with no ability to deliver. The party opposite hid the reality of their spending. They called an election to avoid making difficult choices. Never again will we allow a government to play fast and loose with the public finances.”
Office for Budget Responsibility (OBR) review
She went on to slam the former Conservative government, announcing that the Office for Budget Responsibility (OBR) had published its own review into the Spring Budget forecast.
The OBR says the Tories did not provide them with “all the information” and if they had known their Spring Budget forecast for spending would have been “materially different”.
Reeves added that any comparison between today’s forecast and the spring forecast would be “false” and confirmed they would be implementing the 10 recommendations from the OBR’s review.
Reeves said: “NHS waiting lists are at record levels, children in portacabins as school rooms crumble and prisons overflowing, crimes which are not investigated and criminals not published – that is the country’s inheritance from the party opposite.
“Their plans relied on a baseline for spending this year which we now know was wrong, because it did not take into account the £22 billion deficit.
“Any chancellor would face the same reality and any responsible chancellor would take action.”
Compensation
She set out by saying Sunak had failed to budget to compensate victims of the Post Office Horizon Scandal and the Infected Blood Scandal.
She said the Labour government will provide £11.8 billion for victims of the infected blood scandal, and £1.8 billion to compensate victims of the Post Office scandal.
Tax avoidance
The chancellor says she will reduce wasteful spending and sets out a 2% productivity savings target for government departments. She said a covid corruption team would be set up.
Modernise HMRC systems and employ more staff, and clamp down on umbrella companies who exploit work and go after the promoters of tax avoidance schemes. This will raise £6.5 billion by the end of the forecast, she says.
National Living Wage
The National Living Wage will increase to £12.21 per hour and the minimum wage for over 21 year olds will rise to £10 per hour, while a change to carer’s allowance will allow a carer to earn up to £10,000 while still receiving the allowance.
National insurance
Reeves says she will not increase National Insurance, VAT and income tax for working people.
But employers’ National insurance contributions will rise from 13.8% to 15%. The threshold at which businesses start paying National Insurance on a workers’ earnings will be lowered from £9,100 to £5,000. She said this would will raise £25 billion per year.
Reeves says she is increasing employment allowance to help smaller businesses. The employment allowance will increase from £5,000 to £10,500, which the chancellor says will mean 865,000 employers won’t pay any National Insurance at all next year.
From 2028-29, personal tax thresholds will be increased in line with inflation.
Inheritance tax
Reeves says she will extend the inheritance tax threshold freeze for a further two years to 2030.
That means the first £325,000 of any estate can be inherited tax-free, rising to £500,000 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.
The will bring inherited pensions into inheritance tax from April 2027.
Non-dom tax regime
Reeves has announced plans to abolish the non-dom tax regime and eliminate the “outdated concept” of domicile from the tax system starting in April 2025.
This change affects UK residents whose permanent home, or domicile, for tax purposes is outside the UK, allowing them to avoid UK tax on income earned abroad.
More major announcements
- The house was delighted to hear a cut in duty on draft alcohol, which is “a penny off the pints at the pubs.” Alcohol duty rates on non-draught products will increase in line with RPI from February.
- An additional £2.9 billion will be given to the Ministry of Defence.
- There will also be a £2.3bn increase to the core school’s budget to ensure hiring of teachers into key subjects.
- £500 million for road maintenance with special mention of repairing pot holes.
- £22.6 million cash injection for the day-to-day NHS health budget
- VAT will be introduced on private school fees from January and legislation to remove their business rates relief will be made from April.
- Fuel duty will be frozen next year.
Reeves concluded: “I have made my choices, the responsible choices to restore stability to our country and protect working people. More teachers in our school, more appointments in our NHS, more homes being built, fixing the foundations of our economy and investing in our future. Rebuilding in Britain.”
Retaliation
Rishi Sunak responded: “The OBR has declined to back up her claims of a fictional £22 billion black hole. It is deeply disappointing she has sought to politicise this.
“You only need to look at the facts to see that her inherited claims are nonsense. When we left the office the UK was the fasted growing economy in the world.
“During the election she repeatedly promised her plans were fully funded. She said the budget would balance the books. This budget does not such thing and reveals they haven’t been straight with the British people.
“The chancellor has announced a multi-billion billion spending spree. She said she would not fiddle the figures to get better results. She has done exactly that so she can borrow much more and working people will pay the price.”
