UK budget 2024: Rachel Reeves says 'invest, invest, invest' is the way to deliver growth

Raises in taxes and public spend to drive growth

British Chancellor of the Exchequer Rachel Reeves holds up her budget box outside number 11 Downing Street in London. EPA

Ms Reeves leaves 11 Downing Street. AFP

Ms Reeves with her ministerial team, outside No 11 Downing Street. AP

Protesters hold placards as they demonstrate against Ms Reeves' upcoming budget outside Downing Street. EPA

A view of the Autumn Budget. Photo: by Kirsty O'Connor / Treasury

Ms Reeves prepares for the Budget in her office. Photo: Kirsty O'Connor / Treasury

Britain's Prime Minister Keir Starmer meets with Ms Reeves, days before the announcement of the first budget of the new Labour government. Reuters

Britain's first female Chancellor, Rachel Reeves, delivered her first budget in Parliament on Wednesday, unveiling £40 billion in tax rises and a spending spree to deliver growth.

Ms Reeves announced rises in the National Insurance contributions of employers, rates of Captial Gains Tax and stamp duty on second homes, but tempered them with plans to invest in green hydrogen and technology.

Widely trailed plans to add VAT to private school fees and scrap the non-dom status were also confirmed. It will be replaced with a new residence-based scheme with "internationally competitive arrangements" for temporary residents.

The windfall tax on North Sea oil and gas producers is also set to rise to 38 per cent from 35 per cent, with the levy extended by one year, while the rate of air passenger duty for private jets will rise by a further 50 per cent.

Accusing the Conservatives of having "failed this country", Ms Reeves said their austerity "broke the National Health Service". "Their Brexit deal harmed British businesses. And their mini-budget left families paying the price with higher mortgages. The British people have inherited their failure. A black hole in the public finances, public services on their knees, a decade of low growth and the worst parliament for living standards in modern history."

The Labour Party will rebuild Britain, she said. Ms Reeves, introduced by Deputy Speaker Nusrat Ghani, who reprimanded the government for the early disclosure of budget details, confirmed the well-trailed announcement that the budget would raise taxes on the public by £40 billion to "fix the foundations" of the UK economy.

The only way to drive economic growth is to "invest, invest, invest", she said. "There are no shortcuts. And to deliver that investment, we must restore economic stability and turn the page on the last 14 years."

Every budget she delivers will be “focused on our mission to grow the economy”, she said, adding that the key pillars of the government’s strategy include seeking to “restore economic stability”. Increasing investment and building new infrastructure is “vital for productivity”, said Ms Reeves.

The Office for Budget Responsibility (OBR) said Ms Reeves’ plan “delivers a large, sustained increase in spending, taxation, and borrowing”, with public spending increases of almost £70 billion a year over the next five years.

Key pledges

• National Insurance contributions by employers will rise 1.2 percentage points, from 13.8 per cent to 15 per cent, while the threshold employers start paying them at will be lowered to £5,000, from £9,100.
• Fuel duty will be frozen for another year, meaning taxes will not be higher at the petrol pumps in 2025. Raising taxes on fuel would be "the wrong choice for working people", she said.
• The lower rate of Capital Gains Tax will increase from 10 per cent to 18 per cent, and the higher rate from 20 per cent to 24 per cent.
• Minimum wage rising £12.21 in April.
• Non-dom status scrapped from April. To be replaced by a new residence-based scheme with "internationally competitive arrangements" for temporary residents.
• Inheritance tax threshold frozen for another two years until 2030, meaning the first £325,000 of an estate can be inherited tax-free. It rises to £500,000 if the estate includes a residence passed to direct descendants.
• Rate of air passenger duty for private jets will rise by a further 50 per cent.
• Stamp duty land surcharge for second homes to rise on Thursday to 5 per cent. "This will support over 130,000 additional transactions from people buying their first home, or moving home, over the next five years," Ms Reeves pledged during her Budget.
• VAT to be introduced on private school fees from January. "Ninety-four percent of children in the UK attend state schools. To provide the highest quality of support and teaching that they deserve, we will introduce VAT on private school fees from January 2025 and we will shortly introduce legislation to remove their business rates relief from April 2025, too," she said.
• Windfall tax on North Sea oil and gas producers will rise to 38 per cent from 35 per cent, with the levy extended by one year

Ms Reeves said the budget "marks an end to short-termism", adding the OBR has published a "detailed assessment" of the growth impacts of the government's policies over the next decade.

"The OBR forecast that real GDP growth will be 1.1 per cent in 2024, 2 per cent in 2025, 1.8 per cent in 2026, 1.5 per cent in 2027, 1.5 per cent in 2028 and 1.6 per cent in 2029. And the OBR are clear: this budget will permanently increase the supply capacity of the economy, boosting long-term growth."

Ms Reeves said she will crack down on fraud in the UK's welfare system, as part of reforms to ensure welfare spending is "more sustainable", while vowing to raise £6.5 billion by the end of the forecast period by clawing back unpaid tax.

On income tax and National Insurance thresholds, the Chancellor told MPs the previous government froze income tax and National Insurance thresholds in 2021 and then they did so again after the mini-budget. "Extending their threshold freeze for a further two years raises billions of pounds - money to deal with the black hole in our public finances and repair our public services," she said. "Having considered the issue closely, I have come to the conclusion that extending the threshold freeze would hurt working people. It would take more money out of their payslips."

There will be no extension of the freeze in income tax and National Insurance thresholds beyond the decisions of the previous government, she said. "From 2028-29, personal tax thresholds will be uprated in line with inflation once again. When it comes to choices on tax, this government chooses to protect working people every single time."

On education, Ms Reeves said there would be a "tripling" of investment in breakfast clubs to fund the service in thousands of schools. "I am increasing the core schools' budget by £2.3 billion next year to support our pledge to hire thousands more teachers into key subjects," she said. "So our young people can develop the skills that they need for the future, I am providing an additional £300 million for further education."

There will be a total increase to the Ministry of Defence's budget of £2.9 billion next year, she said. "Ensuring the UK comfortably exceeds our Nato commitments and providing guaranteed military support to Ukraine of £3 billion per year, for as long as it takes."

Public investment is "badly needed" throughout the country, she said. "I said there would be no return to austerity, and that is the choice I have made today. To rebuild our country we need to increase investment. The UK lags behind every other G7 country on business investment as a share of our economy. That matters.

"It means the UK has fallen behind in the race for new jobs, new industries, and new technology. By restoring economic stability and by establishing the National Wealth Fund to catalyse private funding, we have begun to create the conditions that businesses need to invest.

"But there is also a significant role for public investment. For too long, we have seen Conservative chancellors cut investment and raid capital budgets to plug gaps in day-to-day spending.

"The result is clear for all to see: hospitals without the equipment they need, school buildings not fit for our children, a desperate lack of affordable housing, economic growth held back at every turn." The NHS will receive a £22.6 billion increase in the day-to-day health budget, she said.

Introducing the government's four "guardrails", she said: "So that we drive the right incentives in government investments, we will introduce four key guardrails to ensure capital spending is good value for money and drives growth in our economy.

"First, our portfolio of new financial investments will be delivered by expert bodies like the National Wealth Fund and must, by default, earn a rate of return at least as large as that on gilts.

"Second, we will strengthen the role of institutions to improve infrastructure delivery. Third, we will improve certainty, setting capital budgets for five years and extending them at spending reviews every two years.

"Finally, we will ensure there is greater transparency for capital spending, with robust annual reporting of financial investments, based on accounts audited by the National Audit Office, and made available to the Office for Budget Responsibility in every forecast.

"Taken together with our stability rule, these fiscal rules will ensure that our public finances are on a firm footing, while enabling us to invest prudently alongside business."

Setting out the government's investment plans, Ms Reeves said: "Today we are confirming our plans to capitalise the National Wealth Fund, to invest in the industries of the future, from giga-factories, to ports, to green hydrogen.

"Building on these investments, the Business Secretary is driving forward our modern industrial strategy, working with businesses and organisations like Make UK to set out the sectors with the biggest growth potential.

"Today, we are confirming multi-year funding commitments for these areas of our economy, including... nearly £1 billion for the aerospace sector to fund vital research and development, building on our industry in the East Midlands, the South West and Scotland.

"Over £2 billion for the automotive sector to support our electric vehicle industry and develop our manufacturing base, building on our strengths in the North East and the West Midlands.

"And up to £520 million for a new Life Sciences Innovative Manufacturing Fund."

Unveiling plans for 11 new green hydrogen projects across England in addition to GB Energy and the Government's investment into carbon capture and storage, Ms Reeves said: "Earlier this month, we announced a significant multi-year investment between government and business into carbon capture and storage, creating 4,000 jobs across Merseyside and Teesside.

"Today, I am providing funding for 11 new green hydrogen projects across England, Scotland and Wales - among the first commercial-scale projects anywhere in the world - including in Bridgend, East Renfrewshire and in Barrow-in-Furness.

"We are kick-starting the Warm Homes Plan by confirming an initial £3.4bn over the next three years to transform 350,000 homes, including a quarter-of-a-million low-income and social homes.

"And we will establish GB Energy, providing funding next year to set up Great British Energy at its new home in Aberdeen."