Budget 2024 latest: Huge boost for Reeves as IMF growth forecast rises after inflation battle ‘largely won’
Chancellor responds to fresh prediction for the economy ahead of 30 October statement
Your support helps us to tell the story
This election is still a dead heat, according to most polls. In a fight with such wafer-thin margins, we need reporters on the ground talking to the people Trump and Harris are courting. Your support allows us to keep sending journalists to the story.
The Independent is trusted by 27 million Americans from across the entire political spectrum every month. Unlike many other quality news outlets, we choose not to lock you out of our reporting and analysis with paywalls. But quality journalism must still be paid for.
Help us keep bring these critical stories to light. Your support makes all the difference.
Rachel Reeves will announce Labour’s first Budget since coming into power on 30 October, leading one of the most anticipated fiscal events in over two decades.
Ahead of her announcement, the chancellor has welcomed an upgrade to the UK’s economic forecasts from the International Monetary Fund (IMF). The financial agency even said the country’s battle against inflation has “largely been won.”
The country’s GDP is now predicted to grow by 1.1 per cent in 2024 – a major uplift from the 0.7 per cent forecast in July.
Ms Reeves said the new forecast was “welcome” but that there is “more work to do.” She added: “The Budget next week will be about fixing the foundations to deliver change, so we can protect working people, fix the NHS and rebuild Britain.”
New figures from the ONS also show that government borrowing rose to £16.6 billion last month marking the third highest September borrowing since records began, according to the Office for National Statistics (ONS).
This has brought borrowing in the year to date to £79.6 billion – £6.7 billion more than forecast by the Office for Budget Responsibility. The ONS says public sector pay rises contributed to the unexpected rise.
We’ll be bringing you all the latest updates ahead of the big event on 30 October here, on The Independent’s liveblog.
Streeting hints at Budget of major tax rises after bagging billions for NHS from Reeves
NHS problems will not be fixed ‘in a single Budget’, says Streeting
How to take part in the ‘national conversation’ on the future of the NHS
Inheritance tax to rise in Budget as Reeves plans to hit well-off
UK interest rates will drop to 2.75 per cent, Goldman Sachs predicts
ICMYI: Streeting refuses to rule out income tax threshold freeze
Wes Streeting has refused to rule out that the Government will freeze income tax thresholds in the upcoming Budget.
Mr Streeting had previously voted against the measure in opposition while Rishi Sunak was prime minister.
Speaking on Sunday Morning With Trevor Phillips on Sky News, Mr Streeting said: “I’m not going to speculate on what the Chancellor might do in the Budget.
“If you’re asking me whether I would vote against anything in the Chancellor’s Budget? The answer is no, of course I’m not going to do that.”
He went on to say: “This country is paying a heavy price for Conservative failure, and we’re going to have to make some big and difficult choices in this Budget to make sure we fix the foundations of the economy and we don’t end up back here.”
He later added: “What we’re not going to do is duck the difficult decisions, have Government by gimmick, short-term sticking plasters, because that is exactly how we ended up in this situation.”
Wes Streeting warned inflation-busting NHS Budget deal will not be enough
Wes Streeting warned inflation busting NHS Budget deal will not be enough
Health experts urge the government to find more money to tackle waiting lists and improve NHS care
Will there be Business Rates reforms in the budget?
In its election manifesto, Labour said it was committed to reforming the current business rates system “so we can raise the same revenue but in a fairer way”.
What this means has not been spelt out by the party, but it said the new system will be designed to “level the playing field between the high street and online giants, better incentivise investment, tackle empty properties and support entrepreneurship”.
It’s thought this could take the form of an immediate cut to the rates, while also closing loopholes which allow some firms to avoid tax. This will come as welcome news to smaller business owners, but Labour will be careful to ensure their reform maintains a monetary net zero.
Exchequer secretary James Murray MP confirmed this at a Labour conference fringe event hosted by the British Retail Consortium, saying: “It’s within the current envelope. It’s all about raising the same amount of money overall, that’s the commitment.”
Will Reeves increase fuel duty?
Fuel duties, or taxes, apply to purchases of petrol, diesel and a variety of other fuels used both for vehicles and domestic heating.
The level of fuel duty depends on the type of fuel used, with a litre of petrol, diesel, biodiesel and bioethanol attracting a fuel duty of 52.95p. It was cut by 5p by the Conservatives in 2022, after being frozen at 57.95p since 2011.
It represents a significant source of revenue for the government, expected to raise £24.7 billion in 2023-24, according to the Office for Budget Responsibility – equivalent to 2.2 per cent of all receipts.
Scrapping the 5p cut would raise the government an estimated £2bn. However, doing so would not automatically force fuel retailers to bring down their costs, likely meaning higher fees for motorists, at least in the short term.
UK interest rates will drop to 2.75 per cent, Goldman Sachs predicts
UK interest rates will drop to 2.75 per cent, Goldman Sachs predicts
The drop in rates will be welcome news to mortgage borrowers who have had a tough couple of years, although savers will be hit again
UK banks pay record amount in taxes after making bumper profits
UK banks paid a record amount in taxes last year after generating bumper profits, while the gap between taxation on the City and other global financial hubs widens, figures show.
The UK banking sector’s total tax contribution was £44.8 billion for the financial year to the end of March, according to analysis produced by PwC for trade group UK Finance.
With the government set to announce its Budget next week, there has been growing speculation over possible tax changes to help cover shortfalls in public finances.
Gary Greenwood, a research analyst for Shore Capital Markets, said the Government would need to “think long and hard” before potentially increasing taxes for banks.
“While taxing banks more may not get much pushback from the public, they already carry a relatively high tax burden in an international context and we feel that it would also be a damaging move when the Government is seeking to drive increased economic growth,” he said.
What are the rumoured welfare spending cuts?
Labour has made no secret of its ambition to reduce the government’s welfare spending bill, so Ms Reeves will likely take the Budget as her opportunity to do so.
Speaking at Labour’s party conference, the prime minister said: “We will get the welfare bill down because we will tackle long-term sickness and support people back to work.”
What has been confirmed is a crackdown on benefit fraud, which looks to save £1.6bn over the next five years. Also possible is the mooted reform to personal independence payments (PIP) to provide cash vouchers or expenses rather than regular payments – a Conservative-era policy that Labour has refused to rule out.
Threat to high earners as Rachel Reeves looks to plug £40bn Budget black hole
Threat to high earners as Rachel Reeves looks to plug £40bn Budget black hole
Minister refuses six times to say whether Britons on six-figure salaries count as ‘working people’
Will there be an inheritance tax increase?
Inheritance tax is a levy on the estate of someone who has died. This is their property, money and possessions. Crucially, it is not paid if the value of these things is below £325,000.
The tax rate is 40 per cent, but it’s only charged on the part of the estate that’s above the threshold. In 2023/24, only 5 per cent of deaths generated an inheritance tax bill, raising around £7 billion.
However, the IFS writes that the tax measure “is littered with special exemptions”. These include a business relief, the ability to pass on agricultural land tax-free, and the tax-free passing on of pension pots.
The economic think tank says that ending these measures alone would raise £4.8bn a year by 2029.
Could the government tax pension savings?
Pension tax relief is a reduction of the amount of tax paid on private pensions. It helps workers save for retirement by boosting their pension pots.
The amount of tax relief a person is granted is based on their income tax. It will effectively cancel out tax on pension contributions up to a maximum of £60,000.
After this, contributions will be taxed at either 20, 40, or 45 per cent, depending on which income tax rate the worker falls into.
However, the chancellor is thought to be considering a flat 30 per cent pension tax relief rate. This would mean that higher earners would effectively pay 10 per cent in tax, while those on the additional rate would pay 15.
The measure would raise around £3 billion a year, with 7 million earners paying more tax. But it would be better news for basic rate earners, who would actually begin to receive a 10 per cent boost to their pension contributions.
Evaluating the idea last year, the IFS said it would “redistribute the burden of taxation from the bottom 80 per cent to the top 20 per cent of earners.”
Subscribe to Independent Premium to bookmark this article
Want to bookmark your favourite articles and stories to read or reference later? Start your Independent Premium subscription today.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments