Budget 2024 live: Rachel Reeves reveals £40bn in tax hikes and boost to NHS spending 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 but revealed a boost to NHS spending.
Launching an attack on previous Tory governments, the chancellor said Labour had inherited a £22bn “black hole”, and would never again “allow a government to play fast and loose with public finances.
After months spent warning the public of “tough choices” ahead, Ms Reeves promised to “invest, invest, invest” in order to “fix public services” and announced a £22.6 billion increase in the day-to-day NHS health budget.
Increases to employers’ national insurance contributions, stamp duty on second homes and a scrapping of VAT exemption on private schools fees were all confirmed by the chancellor, as well as a new duty on vaping liquids.
However, there were surprise announcements that the freeze on income tax thresholds, often described as a “stealth tax”, would not be extended past 2028, while Ms Reeves has also decided against a hike in fuel duty.
Responding to the Budget, Rishi Sunak accused Ms Reeves of “fiddling the figures” and criticised the government for embarking on an “enormous borrowing spree”.
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Reaction: Reeves Budget could slow interest rates cuts
Responding to the Chancellor’s Budget today, Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales said: “The OBR’s latest outlook offers an underwhelming view of the UK economy with slight downgrades to their GDP projections from 2026. Tax rises on businesses combined with poor productivity could mean that growth is shallower than the OBR is expecting.
“While these tax hikes announced could undermine the government’s growth mission, the ultimate test for this budget will be whether the long overdue boost to investment can significantly increase productivity and living standards over the long term.
“Though a November interest rate cut looks nailed on, the upward pressure on inflation from the notably higher business costs resulting from some of the measures announced may mean that policy is loosened more slowly than expected.”
IFS warns that Reeves is taking a gamble with £40bn tax rises and big boost for public services
The Institute for Fiscal Studies (IFS) has warned that Rachel Reeves is taking a significant gamble with her large tax rises and extra borrowing to fund public services.
Responding to the Budget, Paul Johnson, director of the IFS, warned that the government could have to up push taxes up again if spending pressures on public services do not abate.
He said: “In broad brush strokes, that was the Budget we had been led to expect: big tax rises, more cash for public services, more borrowing and more investment. Look beyond the headline numbers, and there are two big judgements – one could say gambles – that the Chancellor seems to be making.
Mr Johnson added: “The first gamble is that a big cash injection for public services over the next two years will be enough to turn performance around, and that many of the temporary spending pressures won’t persist.
“If she’s wrong about that, and spending pressures don’t dissipate after two years, then to avoid cutting unprotected areas she may well need to come back with another round of tax rises in a couple of years’ time – unless she gets lucky on growth.”
“Which brings us to the second gamble: that this extra borrowing will be worthwhile. Under pre-election plans we were set to borrow an average of £59 billion per year over the next four years. We now expect to borrow an average of £85 billion. The hope is that the benefits – from more funding for public services in the next couple of years, and from more public investment throughout the parliament – will more than offset the costs.
“These costs include higher debt servicing costs but also, according to the OBR, higher inflation and higher interest rates than we’d otherwise have seen.
“A lot hinges on how well the government spends the money. The additional investment is extremely front-loaded, which doesn’t fill me with confidence on how efficiently it will be spent - if indeed it is spent in that timescale.”
Got questions about the Budget?
Chancellor Rachel Reeves has delivered her first Budget, which included a few curveballs.
So what will the announcements mean for your finances? And when will changes come into force?
The political ramifications of the budget are also worth exploring. What does Wednesday’s announcement reveal about Reeves’ and Starmer’s long-term plans?
Join a live Q&A with our chief political commentator John Rentoul at 4pm. You can submit a question for John here.
Watch: Rishi Sunak reacts to Budget 'Broken promise after broken promise'
Reeves confirms new Office for Value for Money
Those with keen ears will have noticed the chancellor mention the Office for Value for Money.
In the summer, Ms Reeves said she had told Treasury officials to do a rapid audit of public spending.
She also said she would set up an independent watchdog called the Office for Value for Money in an effort to cut waste and get technology to speed things up in the civil service.
The office will aim to intervene where waste is detected as well as helping government departments sharpen up their buying methods.
As well as spending well, it will ensure the taxpayer gets value from things like the sale in Nat West shares that the government owns.
Today she confirmed that top civil servant David Goldstone will chair the body.
Labour MPs express relief after bracing for ‘massive spending cuts’
Labour MPs have expressed relief over Rachel Reeves’ Budget, in comments to LabourList.
One said they had seen “lots of messages in my [Constituency Labour Party] WhatsApp saying they are looking forward to canvassing this weekend much more now”.
Another new MP told the outlet of their “enormous relief”, saying: “The weeks of stories beforehand suggested massive cuts to public services and spending, instead we have a Budget for long-term economic growth and which gets to work rebuilding our services and infrastructure.”
And Labour council leader described the Budget as “absolutely superb”, praising increased funding for local government and a “transformational investment” in the NHS.
Labour accused of ‘betrayal’ of Scottish whisky industry
British multinational Diageo has reacted angrily to Rachel Reeves’ Budget, accusing the chancellor of breaking Labour’s promise to support the Scottish whisky industry.
Nuno Teles, managing director of the firm’s UK arm, said: “On the campaign trail, Keir Starmer pledged to ‘back the Scotch whisky industry to the hilt’.
“Instead, the government has broken this promise and slammed even more duty on spirits. This betrayal will leave a bitter taste for drinkers and pubs, while jeopardising jobs and investment across Scotland.”
Watch live: Office for Budget Responsibility responds to Rachel Reeves’ £40bn tax hikes
Budget averts 36% fall in net public investment, IPPR analyst says
Rachel Reeves’ Budget will keep investment in the public sector roughly stable over the course of this parliament, according to Carsten Jung, head of macroeconomics at the IPPR think-tank.
The new plans contrast with a 36 per cent fall under the previous Tory government’s plans, Mr Jung said.
What impact will Budget have on rail travel costs?
Regulated train fares in England will increase by up to 4.6 per cent next year and the price of most railcards – excluding the discount mechanism for disabled passengers – will rise by £5, Rachel Reeves announced in her Budget.
The increase in fares is one percentage point above July’s Retail Prices Index (RPI) measure of inflation, which until 2023 was used by Westminster governments to set the cap on annual rises in regulated fares.
But a Budget document published by the Treasury stated that the 4.6 per cent rise will be “the lowest absolute increase in three years”, with fare changes to come into force in March.
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