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”.
Chancellor undoes Tory tax threshold freezes in final Budget rabbit
Rachel Reeves has pulled a final Budget rabbit out of the hat, promising to end the tax threshold freezes introduced by Rishi Sunak.
The so-called stealth tax, which saw workers quietly dragged into higher tax brackets, were a way of raising billions of extra revenue without explicitly raising income tax or national insurance.
But while Ms Reeves said extending the freeze could raise “billions of pounds to deal with the black hole in our public finances and repair our public services”, she said it “would hurt working people and take more money out of their payslips”.
It would have been embarrassing for the chancellor to keep the freezes in place, having accused the Tories of “picking the pockets of working people” over the move in the past.
Analysis: Relief for the poorest households in debt
Rachel Reeves has said that she will reduce the level of debt repayments that can be taken from people’s Universal Credit payments.
After discussion with think tanks such as the Joseph Rowntree Foundation, Ms Reeves announced that the level of debt repayments that can be taken out of people’s Universal Credit will be lowered from 25 per cent to 15 per cent each month.
This is good news for 1.2 million of the poorest households who will be able to keep more of their Universal Credit payments. And hopefully put them in a better financial position to manage their debt in the long run. Those who benefit will gain an average of £420 a year, according to Ms Reeves’ calculations.
The Joseph Rowntree Foundation has been calling on the government to take this step so that people aren’t forced to choose between going without essentials or getting into debt.
Allowing families to keep more money each month will help them feed their children and pay other households bills - hopefully keeping them from going deeper into debt and relying on crisis charity help.
Big win for boozers as Reeves cuts draft duty
Despite unveiling £40bn worth of tax hikes, Rachel Reeves showed a soft spot for Britain’s boozers in her Budget.
The chancellor promised to cut draft duty by 1.7 per cent, taking a penny off the price of a pint in the pub.
It came as Ms Reeves confirmed she will let duty on non-draft products rise in line with inflation.
The move shows Ms Reeves is backing Britain’s beleaguered hospitality industry, with pub and restaurant bosses having consistently called for the balance of taxes to be tilted away from hospitality venues and towards supermarkets.
Reeves announces fresh tax on vaping and one-off tobacco duty rise
Chancellor Rachel Reeves said the government will renew the tobacco duty escalator and introduce a flat-rate duty on all vaping liquid from October 2026.
She added: “Alongside an additional one-off increase in tobacco duty to maintain the incentive to give up smoking.
“And we will increase the soft drinks industry levy to account for inflation since it was introduced, as well as increasing the duty in line with CPI (Consumer Prices Index) each year going forward. These measures will raise nearly £1 billion per year by the end of the forecast period.”
Analysis: Reeves goes ahead on ‘ideological’ private schools tax
There are serious doubts now that imposing VAT on private school fees will be anything more than ideological rather than raise £1.6 billion needed to fund 6,000 new teachers.
Ms Reeves though has ignored the warnings and gone where no other chancellor has gone before in taxing education.
Already this is a clear dividing line with the Tories who have vowed to reverse the tax on schools and it leaves Labour in danger of looking as though they are attacking the middle class and aspiration.
It is certainly a move which Tony Blair - an old boy of Fettes in Edinburgh (the Scottish Eton) - would not have considered.
Thousands of children are now set to be moved into state schools at the cost of the taxpayer.
Reeves mocks Sunak over air passenger duty
Chancellor Rachel Reeves mocked Tory leader Rishi Sunak as she joked his “ears have pricked up” when she mentioned air passenger duty.
The Chancellor told the Commons: “Air passenger duty has not kept up with inflation in recent years so we are introducing an adjustment, meaning an increase of no more than £2 for an economy class short-haul flight.
“But I am taking a different approach when it comes to private jets, increasing the rate of air passenger duty by a further 50%. That is equivalent to £450 per passenger for a private jet to, say, California?”
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.
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