At Autumn Budget 2024 this Labour UK Government is:
• Strengthening the fiscal framework with new rules to put the public finances on a sustainable path and taking difficult decisions on tax, welfare and spending to restore stability and pay for increased funding for public services.
• Growing day-to-day spending on essential services in real terms between 2023-24 and 2029-30 to support public services.
• Boosting public investment by over £100 billion over the next five years whilst keeping debt on a downward path, with a greater focus on value for money and delivery to help unlock long-term growth.
Inheritance
In July the Treasury published an audit of public spending. This set out £22 billion of in year pressures. These pressures were not limited to 2024-25, with the vast majority recurring in future years.
In addition to resetting departmental spending to address these pressures, the government is fully recognising compensation payments for victims of the Infected Blood and Post Office Horizon IT scandals. This Budget provides for compensation payments in full, at an average cost of £2.3billion a year over six years.
Policy Decisions
To deliver on the promise of change, we are putting stability and investment at the heart of our agenda, by:
Strengthening the fiscal framework:
To support economic stability and underpin the commitment to fiscal responsibility, the government is confirming its robust fiscal rules alongside a set of responsible reforms to the fiscal framework that improve certainty, transparency and accountability:
1. The stability rule will bring the current budget into balance, so that day-to-day costs are met by revenues and the government is only borrowing for investment.
2. The investment rule will ensure that net financial debt is falling as a proportion of GDP.
We are taking tough decisions on spending and welfare – cracking down on fraud, tax avoidance and waste. In July, the government announced £5.5 billion worth of savings in 2024-25 to bring down in-year spending pressures. We are now going further by:
- Not tolerating waste, with new provisions to ensure that every penny the government is already spending is being put to good use – appointing a Covid Counter-Fraud Commissioner to recover public funds from companies that took unfair advantage during the pandemic as well as confirming a chair of the Office for Value for Money.
- Working to eliminate fraud and error in the welfare system with the biggest welfare fraud and error budget package in recent history, saving £3.5 billion in 2029-30.
- Closing the tax gap and ensuring that everyone is paying the tax that they owe by making the largest single investment in HMRC systems to close the tax gap, raising £6.5 billion in 2029-30.
Supporting people with the cost of living – for working people up and down the country by:
- Increasing the National Living Wage to allow for an increase of 6.7% to £12.21 per hour for full time workers on the NLW – worth up to £1,400 for a full-time worker.
- Providing £1 billion to extend the Household Support Fund and Discretionary Housing Payments.
- Preserving the State Pension Triple Lock which will see the basic and new State Pension and Pension Credit’s standard minimum guarantee uprated by 4.1% with over 12 million pensioners gaining up to £475 next year.
- Reducing the cap on deductions from Universal Credit to repay debts from 25% to 15% of the standard allowance from April 2025.
- Increasing the carers allowance weekly earnings limit to allow them to work more hours before losing their entitlement.
Protecting working people from higher taxes in their payslips by:
- Not extending the freeze to income tax and National Insurance contributions thresholds. From April 2028, these personal tax thresholds will be uprated in line with inflation.
- Maintaining the fuel duty freeze and temporary 5p cut for 25-26.
- Delivering on the commitment to not increase taxes on working people, which is why we are not increasing the basic, higher or additional rates of Income Tax, employee National Insurance contributions or VAT. Working people will not see higher taxes in their payslips as a result of the choices made in the Budget.
Raising revenue to fund public services and to restore economic stability
The burden of tax has too often fallen on working people. Under Labour, larger businesses and the richest will pay a little more in tax to help fund our public services such as the NHS.
Part of making no return to the austerity and instability of the past means taking the difficult but right choices to increase the rate of Employer National Insurance Contributions by 1.2 percentage points to 15% and reducing the Secondary Threshold from £9,100 to £5,000 per year. In making this choice, the government is also choosing to protect small businesses by increasing the Employment Allowance to £10,500 and expanding this to all eligible employers.
Delivering a fairer, more sustainable tax system: whilst ensuring the government raises the revenue required to fund public services, the government is taking a balanced approach that creates a fairer system, whilst still promoting entrepreneurship, growth and wealth creation. Therefore the government is:
a) Taking a balanced approach to adjusting the rate of Capital Gains tax, a tax paid by fewer than 1% of adults each year. The rate will change from 10% to 18% on the lower rate and 20% to 24% on the higher. Whilst rates have increased, the government has chosen to maintain the UK’s position as having the lowest Capital Gains Tax of any European G7 economy.
b) Making the inheritance tax system fairer and taking an approach that considers the strongly held-desire to pass down savings to children and grandchildren: by keeping inheritance tax thresholds at existing levels until 6 April 2030, and bringing unused pension funds and death benefits payable from a pension into the scope of inheritance tax, making their treatment consistent with other products, such as ISAs.
c) Continuing to protect small family owned farms and businesses through Agricultural Property Relief (APR) and Business Property Relief (BPR) through a reduced rate of 50% relief on BPR and 50% relief over a threshold of £1m on APR.
d) Renewing the tobacco duty escalator to incentivise giving up smoking, introducing a flat-rate excise duty on vaping liquid and equivalent one-off increase in Tobacco duty from 2026, and increasing the Soft Drinks Industry Levy over the forecast period in line with inflation.
e) Supporting the take up of electric vehicles by maintaining incentives for electric vehicles in Company Car Tax from 2028 and increasing the differential between fully electric and other vehicles in the first year rates of Vehicle Excise Duty from April 2025.
f) Introducing an adjustment to Air Passenger Duty that will mean an increase of no more than £2 on the price of an economy short haul flight but increasing the rate to 50% for private jets.
g) Making Business rates in England fairer to protect the high street.
h) To recognise the economic and cultural importance of British pubs, and commitment to supporting smaller brewers, the government is cutting alcohol duty on draught products from February next year, reducing it by 1 penny per pint.
i) Providing certainty to businesses on tax going forwards by publishing the corporate tax roadmap and confirming the commitment to cap Corporation Tax at 25% – the lowest in the G7 – for the duration of this parliament.
Delivering previous tax commitments– which overall raise £9 billion per year by the end of the forecast to support public services:
a) If you make Britain your home, you should pay your tax here. So the government is abolishing the non-dom tax loopholes.
b) Reforming Stamp Duty Land Tax so those who buy second homes pay 2 percentage points more than before. This will support 130,000 additional people to buy their first home.
c) Increasing, extending and reforming the Energy Profits levy on oil and gas companies.
d) Ending VAT exemption and business rates relief provided to private schools.
Fixing the NHS and reforming public services – The government is rejecting the return to austerity set out in the previous government’s spending plans.
To deliver change the government is:
• Providing an extra c£25.6billion over two years for the NHS.
Begin a process of lasting change across our public services, including:
o Further supporting the recruitment of 6,500 new teachers to help students get the skills they need for the future, getting more teachers into key shortage subjects and tackling retention issues.
o Supporting frontline policing levels across the country and putting the government on track to start to deliver the pledge to boost visible neighbourhood policing with 13,000 more neighbourhood officers and PCSOs.
o Securing the UK’s borders, by establishing a new Border Security Command to tackle organised criminal gangs by reducing the flow of irregular migration toward the UK and safeguarding victims of trafficking.
o Delivering a real-terms funding increase for local government in England spending power next year. Providing the devolved governments with an additional £6.6 billion in 2025-26. This includes £3.4 billion for the Scottish Government, £1.7 billion for the Welsh Government and £1.5 billion for the Northern Ireland Executive.
o a 2.7% real terms increase of the Ministry of Defence’s budget, ensuring the UK comfortably exceeds the NATO spending target of 2% of GDP.
Rebuilding Britain – through the growth mission, the government is restoring stability, increasing investment and reforming the economy to drive up prosperity and living standards across the UK.
To drive forward the growth mission, the government is boosting public investment across the next five years by over £100 billion. This includes:
a) Backing innovation. Investing £20.4 billion into in Research & Development, in 25-26.
b) Getting Britain moving. Going beyond the manifesto commitment to fix an additional 1 million potholes per year and extra investment in roads and rail infrastructure.
c) Building more homes to unblock barriers to growth. Adding £500 million to the Affordable Homes Programme next year to kickstart progress towards 1.5 million homes over this Parliament.
d) Supporting sectors that will drive the next industrial revolution, by removing barriers to growth for priority sectors, including clean energy, by investing:
a. £975m for the aerospace sector over 5 years.
b. Over £2 billion over 5 years to support the automotive sector including the electric vehicle manufacturing sector and supply chain.
c. In kickstarting Great British Energy, as part of the Government’s mission to make Britain a clean energy superpower and to support our industrial strategy.
d) But, the government cannot tax and spend its way to long-term growth. The lifeblood of a growing economy is business investment. That is why the government has already started work to break down the barriers to investment:
e) including major reforms of the planning system to get Britain building again
f) around the International Investment Summit, the government secured £63 billion in investment for the UK economy, and the government’s new National Wealth Fund will invest alongside business in the jobs, industries and infrastructure of the future.
g) the government is also developing a new Trade Strategy to support the commitment to net zero and enhance economic security.
h) and next year will publish a new Industrial Strategy setting out high growth sectors where the UK has real competitive advantage.