Zeno Thinks: Budget 2024: Trick or a Treat for UK voters?
Today the UK Chancellor of the Exchequer Rachel Reeves delivered the first Labour Budget in 15 years.
Like Gordon Brown of old, Reeves has pulled a few rabbits out from her bubbling cauldron this afternoon including a continued freeze to fuel duty and a 1p reduction on the price of a draught pint in the pub.
However, her wand was pointed firmly at the opposition frontbench for the £22bn scary “black hole” that she has been left to navigate. The tax-raising levers used by the Chancellor today are set to generate £40bn to the Exchequer, with the Institute for Fiscal Studies highlighting that it is the second biggest tax-raising Budget on record. This will go a long way to helping to fill the financial void that Reeves believes she was left with.
The new UK Government made delivering economic growth the cornerstone of their successful election campaign. So, it was no surprise that this was a Budget delivered in a serious manner with “responsibility and credibility” at its centre. The OBR itself says that the measures announced today will “leave GDP largely unchanged in five years.” This is a stark reminder of the harsh realities that the new UK Government faces in radically changing the country when economic growth forecasts remain frighteningly low and public finances squeezed. A brooootal reality.
Key quote from the Chancellor
"The choices I have made today are the right choices to restore stability to our public finances, to protect working people, to fix our NHS and to rebuild Britain.
That does not mean that these choices are easy, but they are responsible.
If the party opposite disagrees with the choices that I have made, then they must answer, what choices would they make?"
Headline announcements
Economic forecast:
Growth: The OBR has forecast that the UK economy will expand by 1.1% in 2024, 2% in 2025 and 1.8% in 2026.
Inflation: Inflation will average 2.5% in 2024, 2.6% in 2025 and 2.3% by 2026, this will bring relief to businesses and consumers impacted by ongoing cost of living price rises.
Key announcements:
- Fuel Duty: Frozen and the temporary 5p cut per litre has been extended by an additional year.
- Alcohol Duty: A cut of 1p per pint on draft alcohol. With alcohol duty rates on non-draught products increasing in line with RPI from February next year.
- Sugar Tax: The Soft Drinks Industry Levy will increase over the next five years to account for inflation since it was last updated in 2018, and the duty will also rise in line with inflation every year going forward.
- National Insurance: As expected there has been an increase in employer national insurance contributions, rising from 13.8% in 2024 to 15% from April 2025. This move is expected to raise £25bn a year in tax revenue for the UK government.
- Minimum Wage: The National Living Wage increases by 6.7% from £11.44 an hour to £12.21 for those aged 21 and over. This will be worth £1,400 a year extra for full-time workers.
- Help for High Streets: The Chancellor announced there will be 40% relief on business rates for the retail, hospitality and leisure industry in 2025-26, up to a cap of £110,000 per business.
Public services
- Health: £22.6bn increase in the day-to-day health budget, and a £31bn increase in the capital budget, which is the largest increase in spending outside of Covid since 2010.
- Transport: Confirmation that HS2 will now end at London Euston Station.
- Infrastructure: Chancellor confirms that capital spending will be £100bn over the next five years.
What opinion formers are saying
Leader of the Opposition, Rishi Sunak, in his final PMQs:
“On the day that he took office, the Prime Minister said that he wanted to restore trust to British politics with actions, not words. Well, today, his actions speak for themselves with a Budget that contains broken promise after broken promise and reveals the simple truth that the Prime Minister and the Chancellor have not been straight with the British people.”
Chris Mason, BBC Political Editor, said:
“Big taxes, big borrowing and big spending. But, also projected pretty anaemic growth and inflation above its 2% target. There is one big question – will all this make enough difference that people think their lives are getting better?”
And finally…
We will give the last word to Paul Johnson of the Institute of Fiscal Studies who captured the essence of Labour’s first Budget in power, with the following succinct summation.
“£40bn of tax rises - that is very big indeed”.
Please do get in touch if you need any additional support on navigating today’s 2024 UK Budget.
