‘On July 4 the country voted for change,’ said Chancellor Rachel Reeves in the UK’s first Labour budget in 14 years.
‘And change must be felt through more money in people’s pockets, an NHS that is there when you need it and through an economy that is growing, creating wealth and opportunity for all, because that is the only way to improve living standards.’
Reminding people that it was a Labour government that rebuilt Britain from the rubble of the Second World War in 1945, Reeves added: ‘Today, it falls to this Labour government to rebuild Britain once again.’
In the first budget in our country’s history to be delivered by a woman, Reeves commented: ‘I’m deeply proud to be Britain’s first ever female Chancellor of the Exchequer. To girls and young women everywhere, let there be no ceiling on your ambition, your hopes and your dreams.’
Adding that Labour had a responsibility to pass on a fairer society and a stronger economy to the next generation of women.
Of the last Conservative government, Reeves said: ‘Their austerity broke our NHS, their Brexit deal harmed British business and their Mini budget left families paying the price for higher mortgages.’
All of which left ‘a black hole in the British finances and public services on their knees.’
Reeves said there was a £22 billion black hole in the public finances which showed hundreds of under-funded pressures in the public finances, adding: ‘Never again will we allow a government to play fast and loose with the public finances.’
Outlining a plan to implement in full the 10 recommendations from the OBR, Reeves planned to tackle ‘inherited broken public finances and services too,’ which included:
NHS waiting lists at record levels
Children in Portakabins as school roofs crumble
Trains that don’t arrive
Prisons overflowing
Criminals who are not punished.
She also outlined ‘vital compensation schemes for victims of two terrible injustices: the infected blood scandal and the Post Office horizon scandal,’ with £11.8bn outlined for victims of the infected blood scandal and £1.8bn for the victims of the Post Office Horizon scandal, which were ‘long overdue for the pain and injustice people have suffered.’
In a budget designed to raise taxes by £40bn, Reeves pledged to ‘rebuild our public services’ while maintaining the Bank of England’s 2% inflation target, reducing borrowing and enabling real GDP growth, predicted to reach 1.6% by 2029.
Government savings
Reeves pledged to set a 2% savings target for all government departments to meet next year.
She also appointed a Covid Corruption Commissioner to uncover the companies that used a national emergency to line their own pockets.
And outlined plans for a crackdown on fraud in the welfare system, which is ‘often the work of criminal gangs’.
Counter fraud teams will be appointed to prevent illegal activity alongside new legal measures - including direct access to bank accounts to recover debt - which is intended to raise £4.3bn.
Tax and the cost of living
To ensure people pay what they already owe, Labour plan to modernise HMRC’s systems, cracking down on umbrella companies that exploit workers, while going after promoters of tax avoidance schemes. This will raise £6.5bn for the treasury.
Minimum wage rises to £12.21 an hour
‘Family finances are stretched and paychecks don’t go as far as they once did,’ said Reeves. ‘Today we are supporting people with the cost of living.’
Labour introduced the national minimum wage in 1999 and today Reeves announced plans to increase the National Living Wage by 6.7% to £12.21 an hour, worth up to £1,400 a year for a full-time worker.
‘For the first time, we will move towards a single adult rate phased in over time by initially increasing the National Minimum Wage for 18-20 year olds by 16.3%, as recommended by the Low Pay Commission, taking it to £10 an hour.’
Carers allowance weekly earnings limit increased
‘Carers are looking to increase the hours they work,’ said Reeves.
Carers allowance currently provides £81.90 a week to help those with additional caring responsibilities.
‘Today, I can confirm that we are increasing the weekly earnings limit to the equivalent of 16 hours at the National Living Wage per week, the largest increase in Carer’s Allowance since it was introduced in 1976.
‘That means a carer can now earn over £10,000 a year while receiving Carer’s Allowance, allowing them to increase their hours where they want to and keep more of their money.’
Universal debt repayments percentage lowered
Reeves announced £1 billion to extend the household support fund and discretionary housing payments to help those facing financial hardship.
She also pledged to reduce the level of debt repayments taken from universal credit from 25% to 15% of a standard allowance.
This means ‘1.2 million of the poorest households will keep more of their money each year, up to £420 a year.’
Workers’ rights
Reeves outlined plans to protect working people from unfair dismissal, safeguard them form bullying and provide better access to maternity and paternity leave.
Pensions triple lock kept
Pledging to keep the pensions triple lock, Reeves said spending on pensions will rise to £31 billion by 2029/30.
The new state pension will be uprated by 4.1% in 2025-26, meaning 12 million pensioners will gain up to £470 next year.
The Pension Credit Standard Minimum Guarantee will also rise by 4.1% from around £11,400 per year to around £11,850 for a single pensioner.
Fuel duty frozen
‘Increasing Fuel duty next year would be the wrong choice,’ said Reeves. ‘So I’ve decided to freeze fuel duty next year and save the 5p cut next year too. There will be no higher taxes at the petrol pumps next year.'
National insurance frozen for employees
‘I will not increase your national insurance, VAT or Income Tax,’ said Reeves.‘Working people will not see higher taxes in their payslips. A promise made and a promise fulfilled.
‘But to raise the revenues required to fund our public services & to restore public stability, I will increase employers' national insurance by 1.2% to 15% by April 2025.’
There will be no extension of the freeze in income tax and national insurance thresholds and instead personal tax thresholds will be uprated inline with inflation once again.
‘This government chooses to protect working people every single time,’ said Reeves.
Tobacco and soft drinks
The price of tobacco will rise inline with the Retail Price Index +2% and duty will be added on vapes from 2026.
A soft drinks industry levy will also be introduced, increasing duty inline with Consumer Price Index going forward.
These measures are designed to raise £1 billion a year.
Air passenger duty
Has not kept up with inflation in recent years, so Labour are introducing an adjustment, which will mean an increase of no more than £2 for a standard economy flight.
However, for those lucky enough to fly by private jet, the news is not so good. Air passenger duty will rise by 50%, costing around £450 per passenger for a private jet to California.
Alcohol duty
Duty rates on non-draught products are set to increase along with the Retail Price Index next year. However draught duty will be cut by 1.7%, cutting ‘a penny off the pint in the pub’.
Private schools and VAT
Currently 94% of the UK’s children attend state schools.
In a move designed to raise £9 billion for the treasury, ‘We will introduce VAT on private school fees from January 2025, and remove business rates relief too,’ said Reeves.
Breakfast clubs at schools
'Every child deserves to have very best start in life and the very best start to the school day too, so we’re tripling investment in breakfast clubs to fund them in thousands of schools,’ said Reeves.
The core schools budget will also be increased by £2.3 billion to hire thousands more teachers into key subjects.
A further £300m was pledged for further education, as SEN provision to improve outcomes for the most vulnerable children is to receive a £1 billion uplift in funding, up 6% from this year.
Schools in general will be given a 19% increase in funding through £6.7bn of capital investment to the Department for Education.
£1.4 billion has been earmarked for the schools in greatest need and a further £2.1 billion more for school maintenance.
NHS funding
The NHS will receive a £22.6 billion increase in its day to day health budget and a £3.1 billion increase in its capital budget. ‘The largest real terms growth outside of Covid since 2010,’ said Reeves.
The funding is designed to deliver repairs and upgrades to NHS buildings, increase capacity for tens of thousands of procedures and fund additional new beds.
Labour also plans to launch new surgical hubs and diagnostic centres, so people waiting for treatment can get it as quickly as possible.
‘We can now begin to bring waiting lists down,’ said Reeves. ‘Our target for waiting list times will be no longer than 18 weeks.’
‘These are the right choices to fix our NHS, protect working people and rebuild Britain.
‘More teachers in our schools, more appointments in our NHS and more homes being built.’