Rachel Reeves is announcing her financial update – here are the main points, with political analysis
Rachel Reeves says the UK voted for change, and the Labour government has a mandate for a decade of “national renewal”.
Employees will not pay more directly, Reeves says. However, she will raise employers’ national insurance contributions by 1.2 percentage points to 15% from April.
The government will also reduce a secondary threshold from £9,100 to £5,000.
Those measures will raise £25bn a year by the end of the forecast period.
Before the budget, employers were liable for a rate of 13.8% of workers’ earnings above £175 a week. An increase of one percentage point would raise an estimated £8.5bn.
Capital gains tax will be increased. The lower rate will be raised from 10% to 18%, while the higher rate will rise from 20% to 24%.
The government will extend a freeze on the threshold for inheritance tax, allowing £325,000 to be inherited tax free.
There will be tax raises worth £2bn from reforming reliefs for business and agricultural assets. After £1m, those assets will attract inheritance tax of 20%.
Reeves says Labour inherited a £22bn “black hole” with allegedly unfunded pledges by the Conservative government.
The Office for Budget Responsibility (OBR), the government’s budget watchdog, has published a review saying that the previous government did not disclose details of spending. Those details would have made forecasts “materially different”, Reeves says.
Reeves says the government will implement 10 recommendations from the OBR’s review.
The chancellor will maintain the Bank of England’s 2% target for inflation.
Inflation will average 2.5% in 2024, rising to 2.6% in 2025, before gradually dropping to 2% in 2029, according to OBR forecasts. Inflation was at 1.7% in September, below the Bank of England’s 2% target, and down from 11% in October 2022.
The OBR slightly upgrades its growth forecast for this year, but adjusts them down in later years. GDP growth is forecast to be 1.1% in 2024, then 2%, 1.8%, 1.5%, 1.5%, and 1.6% in 2030, Reeves says. At the spring budget under the then Conservative chancellor Jeremy Hunt the OBR had forecast 0.8% growth this year, 1.9% in 2025, and 2% in 2026.
Reeves announces new rules to not borrow for day-to-day spending. The current budget will be balanced within three years of forecasts.
The government will run a deficit of £26.2bn in 2026, but will achieve a surplus of £10.9bn in 2027-28, £9.3bn in 2028-29 and £9.9bn in 2029-30.
Public sector net debt will fall from £127bn in 2024-25, falling gradually to £70.6bn by 2029-20.
Reeves confirms that the “national living wage”, the legal minimum for over-21s, will increase by 6.7% to £12.21, equivalent to £1,400 a year for an eligible full-time worker.
There will be a single adult rate phased in over time to eventually equalise pay for under-21s.
Reeves says increasing fuel duty next year would be the “wrong choice”, so she extends the freeze for a year and maintains the last government’s 5p cut.
Fuel duty was frozen between 2011 and 2022, and cut by 5p in March 2022 after Russia’s full-scale invasion of Ukraine.
Continue reading… The Guardian Read More Rachel Reeves is announcing her financial update – here are the main points, with political analysisPolitics live: latest news and reaction on UK budgetRachel Reeves says the UK voted for change, and the Labour government has a mandate for a decade of “national renewal”.Employees will not pay more directly, Reeves says. However, she will raise employers’ national insurance contributions by 1.2 percentage points to 15% from April.The government will also reduce a secondary threshold from £9,100 to £5,000.Those measures will raise £25bn a year by the end of the forecast period.Before the budget, employers were liable for a rate of 13.8% of workers’ earnings above £175 a week. An increase of one percentage point would raise an estimated £8.5bn.Capital gains tax will be increased. The lower rate will be raised from 10% to 18%, while the higher rate will rise from 20% to 24%.The government will extend a freeze on the threshold for inheritance tax, allowing £325,000 to be inherited tax free.There will be tax raises worth £2bn from reforming reliefs for business and agricultural assets. After £1m, those assets will attract inheritance tax of 20%.Reeves says Labour inherited a £22bn “black hole” with allegedly unfunded pledges by the Conservative government.The Office for Budget Responsibility (OBR), the government’s budget watchdog, has published a review saying that the previous government did not disclose details of spending. Those details would have made forecasts “materially different”, Reeves says.Reeves says the government will implement 10 recommendations from the OBR’s review.The chancellor will maintain the Bank of England’s 2% target for inflation.Inflation will average 2.5% in 2024, rising to 2.6% in 2025, before gradually dropping to 2% in 2029, according to OBR forecasts. Inflation was at 1.7% in September, below the Bank of England’s 2% target, and down from 11% in October 2022.The OBR slightly upgrades its growth forecast for this year, but adjusts them down in later years. GDP growth is forecast to be 1.1% in 2024, then 2%, 1.8%, 1.5%, 1.5%, and 1.6% in 2030, Reeves says. At the spring budget under the then Conservative chancellor Jeremy Hunt the OBR had forecast 0.8% growth this year, 1.9% in 2025, and 2% in 2026.Reeves announces new rules to not borrow for day-to-day spending. The current budget will be balanced within three years of forecasts.The government will run a deficit of £26.2bn in 2026, but will achieve a surplus of £10.9bn in 2027-28, £9.3bn in 2028-29 and £9.9bn in 2029-30.Public sector net debt will fall from £127bn in 2024-25, falling gradually to £70.6bn by 2029-20.Reeves confirms that the “national living wage”, the legal minimum for over-21s, will increase by 6.7% to £12.21, equivalent to £1,400 a year for an eligible full-time worker.There will be a single adult rate phased in over time to eventually equalise pay for under-21s.Reeves says increasing fuel duty next year would be the “wrong choice”, so she extends the freeze for a year and maintains the last government’s 5p cut.Fuel duty was frozen between 2011 and 2022, and cut by 5p in March 2022 after Russia’s full-scale invasion of Ukraine. Continue reading…
