Budget 2024 live: Rachel Reeves reveals £40bn in tax hikes and more borrowing in historic speech
Chancellor promises to ‘invest, invest, invest’ after months of bleak warnings over economy
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Rachel Reeves has announced tax hikes that will raise an eye-watering £40bn in her historic first Budget.
The chancellor blamed previous Conservative governments for the measures. She accused them of blowing a hole in the public finances and failing to fund compensations schemes, such as the one for those affected by the infected blood scandal.
After months of warning the public of the “tough choices” ahead, Ms Reeves promised to “invest, invest, invest” in order to “fix public services”.
Delivering the first Labour budget since Alistair Darling in 2010, she said: “My belief in Britain burns brighter than ever. And the prize on offer today is immense.
“More pounds in people’s pockets. An NHS that is there when you need it. An economy that is growing, creating wealth and opportunity for all. Because that is the only way to improve living standards.
“There are no short cuts. To deliver that investment we must restore economic stability.”
Ms Reeves added she was “deeply proud” to be the first female chancellor and it showed young girls there should be “no ceiling on your ambitions”.
Non-dom tax abolished
The Chancellor has just announced the abolishment of the non-nom tax status from April 2025.
She told the house that those who “make this country their home” they should pay the correct tax.
A “non-domiciled individual” is a person who lives in the UK but is not settled here permanently.
They will only pay UK tax on money made in the country, and can avoid paying it on their foreign income if they opt to claim the “remittance basis”. This allows wealthy individuals living in the UK to elect the lower-tax country as their domicile, making for major savings.
Reeves confirms no increase to national insurance, VAT or income tax for working people
Chancellor Rachel Reeves has confirmed she will not increase national insurance, VAT or income tax for working people.
She 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.”
Help for small businesses announced
Chancellor Rachel Reeves has unveiled an increase to the Employment Allowance for small businesses, which allows eligible employers to reduce their national insurance liability.
She told the Commons: “I am today increasing the Employment Allowance from £5,000 to £10,500. This means 865,000 employers won’t pay any national insurance at all next year, and over one million will pay the same or less as they did previously.
“This will allow a small business to employ the equivalent of four full-time workers on the national living wage without paying any national insurance on their wages.”
Analysis: Reeves caves over fuel duty
Rachel Reeves has become the latest chancellor to cave under pressure to keep fuel duty frozen.
In a very expensive boost to drivers, Ms Reeves said she will spend more than £3bn avoiding an increase in the levy next year and promised “no higher taxes at the petrol pump”.
She said that baked into the numbers she inherited from the previous government is an assumption that fuel duty will rise by inflation next year, and that a temporary 5p cut will be reversed.
The chancellor said it would cost more than £3bn to keep the cut, but added that letting fuel duty rise next year would be “the wrong choice for working people”.
She becomes the latest in a long line of chancellors to crumble under pressure from the motoring lobby to keep fuel duty frozen, rather than letting it rise in line with inflation.
Capital gains tax to be increased
The headline rates of capital gains tax will increase, with the lower rate rising from 10 per cent to 18 per cent and the higher rate from 20 per cent to 24 per cent, the Chancellor has announced.
Capital Gains Tax (CGT) is paid on the profit made when an asset which has increased in value is sold. It is applied to things like the sale of personal possessions worth more than £6,000 (apart from a car), property that’s not the seller’s main home, shares and business assets.
Analysis: Reeves pulls out her first rabbit
Have briefed there will be “no rabbits” produced in her Budget, the chancellor has produced one on employers’ national insurance contributions.
By exempting 650,000 small businesses from NICs altogether and reducing the bill for another million she has seen off some of the criticism of the overall tax rise on NICs.
It is a clever move because if she wants to produce economic growth she will need to get it from start-ups and small businesses going forward.
Analysis: Rachel Reeves announces big increase in carers allowance
Chancellor Rachel Reeves told the Commons: “Carers allowance currently provides up to £81.90 per week to help those with additional caring responsibilities. Today I can confirm that we are increasing the weekly earning limits to the equivalent of 16 hours at the national living wage per week. The largest increase in carers allowance since it was introduced in 1976.
This means a carer can now earn over £10,000 a year while receiving carers allowance - allowing them to increase their hours where they want to and allowing them to keep more of their money.”
She also said she was concerned about carers getting in to debt to repay DWP overpayments and confirmed that the work and pensions secretary would carry out a review to “develop the right solutions”.
Increase to employers’ national insurance contributions
A 1.2 per cent increase to employers’ national insurance contributions (NICs) has just been confirmed. This is different to NICs paid by workers – it is paid by their employers on top of their wages.
The rate will now rise from 13.8 per cent to 15 per cent. Previous analysis has estimated that this measure could raise up to £4.5bn, but some economists are more critical.
The Institute for Fiscal Studies (IFS) has spoken out against the move in the past, saying it would raise closer to £4.5bn.
What’s more, director Paul Johnson previously said it would constitute a “straightforward breach” of Labour’s manifesto pledge not to raise taxes on working people, as employers are likely to pass the rise off in the form of lower wage growth.
Reeves announces rise to carers allowance
The weekly earnings limit for carers allowance will rise to the equivalent of 16 hours a week at the national living wage, the largest increase since the allowance was introduced, the chancellor has announced.
She said they would also review overpayments.
Reeves attacks Tory legacy: ‘We will never again play fast and loose with public finances’
Rachel Reeves said the Government would publish a “line-by-line breakdown of the £22 billion black hole that we inherited”, saying this showed “hundreds of unfunded pressures on the public finances”.
The Chancellor told MPs: “The Office for Budget Responsibility has published their own review of the circumstances around the spring budget forecast.
“They say that the previous government, and I quote, ‘did not provide the OBR with all the available information to them’ and that had they known about these ‘undisclosed spending pressures that have since come to light’ then their spring budget forecast for spending would have been, and, I quote again, ‘materially different’.”
Ms Reeves added: “Let me make this promise to the British people: never again will we allow a government to play fast and loose with the public finances and never again will we allow a government to hide the true state of our public finances from our independent forecaster.
“That’s why today, I can confirm that we will implement in full the 10 recommendations from the independent Office for Budget Responsibility’s review.”
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