Chancellor sets out Labour's first budget raising taxes by £40 billion
Chancellor Rachel Reeves has set out her first budget
Last updated 30th Oct 2024
Chancellor Rachel Reeves says the Budget she set out today will hike taxes by £40 billion but promised to “fix the foundations” of the economy and repair the public finances.
In the first Labour budget since 2010 – and the first ever delivered by a woman – Ms Reeves promised to “invest, invest, invest”.
But she said the “black hole” left by the Conservatives required tens of billions of additional taxes.
Here are the main announcements from today's Budget:
- Fuel duty frozen
- Duty on draft alcohol is cut, but other alcohol tax will rise by RPI
- No increase in National Insurance rates for workers.
- VAT, and income tax rates frozen
- Employer's National Insurance contributions raised
- National minimum wage increases to £12.21
- Nearly £14 billion put aside for compensating victims of the post office scandal and the infected blood scandal
- Inheritance tax thresholds frozen
- Capital gains tax increasing
- Budget for schools goes up by £2.3bn, with an extra £1bn for SEND
- Air passenger duty going up by 50% for private jets
- VAT introduced on public school fees
- Tobacco duty raised
- £22.6bn for the NHS's day-to-day budget
Chancellor Rachel Reeves told the Commons “this Budget raises taxes by £40 billion”.
“Any chancellor standing here today would face this reality, and any responsible chancellor would take action. That is why today, I am restoring stability to our public finances and rebuilding our public services.”
VAT and income tax frozen but employer's National insurance contribution to rise
National Insurance rates for employees, VAT, and income tax rates were all held, but as expected, the rate of national insurance that businesses pay will go up.
Rachel Reeves told the Commons: “The last government made cuts of £20 billion to employees’ and self-employed national insurance in their final two budgets. These tax cuts were not honest. Because we now know they were based on a forecast which the OBR (Office of Budget Responsibility) say would have been ‘materially different’ had they known the true extent of the last government’s cover-up.
“Since July, I have been urged on multiple occasions to reconsider these cuts. To increase the taxes that working people pay and see in their payslips. But I have made an important choice today: To keep every single commitment that we made on tax in our manifesto.
“So I say to working people: I will not increase your national insurance, your VAT, or your income tax. Working people will not see higher taxes in their payslips as a result of the choices I make today. That is a promise made – and a promise fulfilled.”
Petrol and diesel duty held
Rachel Reeves said it would be the “wrong choice” to increase fuel duty next year, saying she would continue the freeze on fuel tax and maintain the temporary 5p cut for another year.
Tobacco and drinks taxes
Rachel Reeves has announced the Government will cut draught duty by 1.7%, which means “a penny off a pint in the pub”.
The Chancellor told the Commons: “I can confirm that alcohol duty rates on non-draught products will increase in line with RPI from February next year, but nearly two-thirds of alcoholic drinks sold in pubs are served on draught.
“So today, instead of uprating these products in line with inflation, I am cutting draught duty by 1.7%, which means a penny off a pint in the pub.”
Chancellor Rachel Reeves said the Government will renew the tobacco duty escalator for the remainder of the Parliament at RPI (Retail Prices Index) plus 2%, increase duty by a further 10% on hand-rolling tobacco this year and introduce a flat-rate duty on all vaping liquid from October 2026.
Education
On education, Rachel Reeves said there would be a “tripling” of investment in breakfast clubs to fund the service in thousands of schools.
The Chancellor also told the Commons: “I am increasing the core schools’ budget by £2.3 billion next year to support our pledge to hire thousands more teachers into key subjects.
“So our young people can develop the skills that they need for the future, I am providing an additional £300 million for further education.”
On the need to reform special educational needs provision, Ms Reeves said: “To support that work, I am today providing a £1 billion uplift in funding, a 6% real-terms increase from this year.”
Capital gains tax
The Chancellor announced the lower rate of Capital Gains Tax will rise from from 10% to 18%, the higher rate will also go up, from 20% to 24%.
This is the tax on money that comes from things like selling shares, investements or second homes.
Money budgeted for compensation schemes
In the budget today Rachel Reeves said that while compensation schemes had previously been outlined, they had not been budgeted for.
The Chancellor said she would put aside £11.8 billion to compensate for those affected by the infected blood scandal; she also confirmed £1.8 billion would be spent compensating victims of the Post Office Horizon scandal.
Minimum wage increases
It was announced yesterday that the minimum wage would be increased to £12.21 per hour and that was confirmed in today's speech.
The Chancellor also confirmed the lower rate for 18-20-year-olds would rise to £10 an hour and would eventually be phased out entirely, matching the overall minimum wage.
Pensions
Chancellor Rachel Reeves reiterated the Government’s commitment to the pension triple lock, telling the Commons: “This commitment means that while working-age benefits will be uprated in line with CPI at 1.7%, the basic and new state pension will be uprated by 4.1% in 2025-26.
“This means that over 12 million pensioners will gain up to £470 next year.”
She added: “The pension credit standard minimum guarantee will also rise by 4.1% from around £11,400 per year to around £11,850 for a single pensioner.”