Budget 2024 latest: ‘Big and difficult choices’ warns health secretary as tax threshold freeze not ruled out
Speculation is mounting ahead of 30 October
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The health secretary has declined to rule out extending the freeze on income tax thresholds as speculation about possible tax increases in the Budget continued to mount.
Wes Streeting said he would not guess measures that the Chancellor might introduce in the Budget, but told broadcasters on Sunday morning that he had already agreed health spending with Rachel Reeves.
Mr Streeting told Sky News: 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.”
He went on to say: “There are a whole load of choices that we will have to make that we would have preferred not to. But if we don’t make the choices now, we will end up paying a much heavier price for failure.
“We’re not prepared to do that. We’re going to make the right long term decisions.”
We’ll be bringing you all the latest updates ahead of the big event on 30 October here, on The Independent’s liveblog.
What other steps could be taken to tackle the UK’s economic challenges?
There have been rumours Labour could tweak the fiscal rules the Government uses to constrain its own spending and tax decisions.
Chief among those under consideration for change is the period over which the Government aims to see national debt falling as a percentage of the UK’s overall economic output.
Relaxing this rule to a longer period than the current five-year target, or removing spending by certain public organisations from the total, could allow the Chancellor to borrow more cash to invest in major infrastructure projects such as railways, roads, hospitals and new prisons.
What has the Government already said about how it plans to manage the public finances?
Labour has vowed there will be no return to austerity while it is in government.
The party also made a manifesto promise not to raise the major taxes on “working people”: national insurance, income tax and VAT.
Instead, it has committed to specific tax rises, such as the decision to start charging VAT on private schools, in order to fund their agenda.
However, there are hints further tax rises could come, and also that the Chancellor may make changes to the way the Government calculates its debt reduction targets.
What are the problems Labour faces as it sets out its spending plans?
Public services including the NHS and local councils are struggling across the UK, as they grapple with an ageing population, backlogs caused by the pandemic, and the aftermath of the coalition-era austerity programme.
Labour has brokered a pay deal for a swathe of public servants after several years of industrial action, a spending commitment worth £9 billion by some estimates.
Ms Reeves has also claimed the previous Conservative government did not account for the costs of some of its promises, which now need to be met or scaled back.
These commitments, alongside keeping the Government’s ongoing costs “standing still”, made up the so-called £22 billion “black hole” in the public finances which Labour said it needs to fill.
However, Ms Reeves is said to have since identified a far larger £40 billion funding gap which she will seek to plug to protect key departments from real-terms cuts and put the economy on a firmer footing.
Ending private school tax breaks quickly is ‘right’ decision, says minister
An education minister has said it is “right” to end tax breaks for private schools as soon as possible in order to raise funding for the state sector.
Baroness Smith of Malvern defended the speed at which the policy was being introduced, arguing it had been Labour’s plan in opposition and was included in the party’s election manifesto.
From January, the Government plans to remove the VAT exemption and business rates relief for private schools to enable funding for 6,500 new teachers in state schools.
Currently, independent schools do not have to charge 20% VAT on their fees because there is an exemption for the supply of education.
One of the criticisms levelled by opponents is the short timescale involved.
Tory peer Lord Lexden, who is president of the Independent Schools Association, criticised the “great haste” at which the Government was introducing the measure during a debate in Parliament.
‘Listen to voters’ and block Chancellor’s Budget cuts, Flynn tells Starmer
Sir Keir Starmer has been told to “listen to voters” and block his Chancellor’s plans to impose deep cuts in this year’s Budget.
Rachel Reeves is looking to raise up to £40 billion through tax hikes and spending in her 2024 autumn Budget at the end of the month.
But she has faced backlash from within her own party with some ministers unhappy at being asked to reduce spending by as much as 20%.
Stephen Flynn, the SNP’s leader at Westminster, has written to the Prime Minister urging him to intervene and stop the cuts.
He said that Sir Keir must “listen to voters and your own cabinet colleagues: intervene now, overrule the Chancellor and stop the cuts, or people in Scotland will never forgive the Labour Party”.
Claiming the Chancellor’s Budget was “descending into total chaos” he urged the Prime Minister to “immediately intervene and block the Chancellor’s plans for devastating austerity cuts”.
Rachel Reeves planning £3bn welfare cuts in Budget
Rachel Reeves will seek to make around £3 billion of cuts to welfare over the next four years by restricting access to sickness benefits, it is understood.
The Chancellor is expected to commit to the previous Tory government’s plans to save the sum by reforming work capability rules, as first reported by The Telegraph.
Under Conservative proposals, welfare eligibility would have been tightened so that around 400,000 more people who are signed off long-term would be assessed as needing to prepare for employment by 2028/29, reducing the benefits bill by an estimated £3 billion.
It is understood that Ms Reeves will commit to the plan to save £3 billion over four years, but Work and Pensions Secretary Liz Kendall will decide how the system will be changed in order to achieve this.
Record number of UK firms facing serious financial strain, report finds
A record number of UK businesses are facing a serious financial strain, as post-Covid debts squeeze all corners of the economy, a report has found.
The warning comes after a series of businesses have been on the brink of collapse or faced insolvency this year, including retailers Ted Baker and Carpetright, restaurant group TGI Fridays and construction firm ISG.
There were 632,756 firms flagged as being in “significant” financial distress between July and September.
Ric Traynor, the executive chairman of Begbies, said the decline in the level of firms heading toward collapse was a “welcome surprise after a challenging year”.
“That said, it is too early to say if this is a trend that will continue into the autumn – traditionally a busy period for corporate insolvencies,” he added.
“While there are tentative signs of a recovery, uncertainty continues to loom over UK businesses.
“In response, many business leaders are holding their breath as they await clarity over what the forthcoming Budget will bring.”
Many business leaders “expect companies and investors to bear the brunt of changes to the tax regime”, he said, with an increase to employer national insurance among the measures which the Government has not ruled out.
What should I do with my savings ahead of the Budget?
What should I do with my savings ahead of the Budget?
Reports that pensioners could have tax breaks cut or axed have led to savers withdrawing chunks of their retirement pots ahead of the chancellor’s announcement
Workers set for income tax hike as Rachel Reeves ‘to extend freeze on thresholds’
Workers set for income tax hike as Rachel Reeves ‘to extend freeze on thresholds’
Conservatives have accused Keir Starmer and Rachel Reeves of preparing to break a manifesto pledge
Reeves’ capital gains tax plans will sidestep homeowners, reports say
Experts have long anticipated that Labour will put capital gains tax up in the Budget on 30 October. This is the levy is paid on the profit made when an asset which has increased in value is sold. This includes houses, assets and shares, all paid between 20 and 28 per cent.
The latest reports indicate that Ms Reeves will respond to calls to raise capital gains tax in line with income tax bands – meaning rates of 20 to 40 per cent – but will exempt property from the new rates.
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