Rachel Reeves unveils her first Labour budget in over a decade, marking a significant moment for British politics. As the first female Chancellor to deliver a budget, she faces high expectations and scrutiny. This budget represents a shift in the economic landscape, aiming to address past negligence and promote growth. Her proposals are comprehensive, addressing various sectors and promising stability.
A New Chapter for British Economy
Rachel Reeves has declared that Britain voted for change and that her government has the mandate to promote stability and initiate a decade of renewal. She emphasizes the need to “invest, invest, invest” as a means to stimulate growth, echoing Labour’s historic role in renewing Britain. Her budget allocates £11.8 billion to compensate victims of the infected blood scandal and £1.8 billion for victims of the Post Office scandal.
Public Services Under Spotlight
Reeves acknowledges the problems plaguing public services: NHS waiting lists, crumbling schools, and more. She criticised the previous government for neglecting these issues, stating that it failed to allocate necessary funds for public services and compensations. The new budget seeks to rectify this by investing heavily in restoring these public services.
Fiscal Strategy and Economic Outlook
Reeves is maintaining the Bank of England’s inflation target of 2%, acknowledging the work of its staff and advice from her predecessors. The government’s stability rule ensures no borrowing for current spending, aiming to achieve this by 2029-30. Forecasts suggest a decline in borrowing from 4.5% of GDP to 2.1% by the end of the forecast period.
Growth projections show a mixed outlook: GDP growth of 1.1% in 2024 rising to 2% in 2025, but tapering off in subsequent years. Reeves plans to announce a Covid corruption commissioner to recover misappropriated funds from fraudulent Covid contracts, alongside appointing David Goldstone as chair of the new Office for Value for Money.
A crackdown on welfare fraud is expected to save £4.3 billion, with new legal powers to prevent such activities. The budget also includes measures to boost employment, increasing the national minimum wage and raising earnings before affecting carer’s allowance.
Pensions and Tax Adjustments
Retired workers will see an increase in State Pension by up to £470 in 2025-26, in line with the Triple Lock commitment. Employers’ national insurance contributions will rise to 15%, though individual income taxes remain unchanged.
Capital gains tax will increase, maintaining competitive levels compared to other European G7 countries. Changes in inheritance tax rules are expected to raise over £2 billion, with a focus on closing loopholes and ensuring fairness.
Transport and Housing Initiatives
The budget includes commitments for enhancing transportation, such as the trans-Pennine upgrade and improved rail services between Oxford, Milton Keynes, and Cambridge. Funding is secured for HS2’s extension to Euston station.
Over £5 billion is allocated for affordable housing, with local authorities retaining proceeds from council home sales. These initiatives aim to improve connectivity and housing availability across the UK.
Business and Employment Support
Support for retail and hospitality is evident with a 40% business rates relief and reduced duty on draft alcoholic drinks. Non-dom status will be abolished, aligning with the aim to simplify the tax system and attract investment.
Day-to-day government spending is set to rise by 1.5%, and capital spending by 1.7%. There’s a significant increase in special educational needs funding and investment in breakfast clubs, reflecting commitment to social welfare.
The MOD will see a boost with an extra £2.9 billion, alongside additional funds for social care and homelessness support, emphasizing the budget’s extensive coverage on social issues.
Financial Prudence and Transparency
Reeves’ budget introduces changing the debt measure to public sector net financial liabilities, promoting investment. Four “guardrails” are set to ensure responsible borrowing.
The rules include ensuring new investments by bodies like the National Wealth Fund yield returns and enhancing infrastructure delivery certainty. They aim for transparency with annual reports from the National Audit Office.
Conclusion of Tax Reforms
Inheritance tax reforms continue, balancing relief and ensuring contributions from high-value estates. Air passenger duty adjustments aim at fairness, with private jet charges increasing significantly.
Reeves reaffirms the removal of non-dom tax status and introduces reliefs for business sectors, focusing on growth and fairness in tax policies.
Support for Social and National Development
An increase in budgets for councils, social care, and more, aligns with the Labour’s promise to end austerity. The budget strengthens UK’s social safety nets.
Additional funding allowances for devolved governments in Scotland, Wales, and Northern Ireland reflect a comprehensive approach to national development and unity.
Protecting Local Interests
The budget prioritises local interests by freezing fuel duties, aiming to provide relief for motorists against economic pressures. This move supports working communities.
Rachel Reeves’ budget marks a transformative step in UK politics, aiming to balance economic growth with social welfare. By tackling past issues and laying foundations for the future, it reflects Labour’s commitment to building a fairer society.
