In this briefing we summarise:
- What were the key policy takeaways from the Chancellor’s statement
- Insider analysis from Pagefield experts who have worked inside both government and opposition
- How the media, opposition and economists have reacted
- Key links for you to dive into more detail
Our top 3 policy takeaways
Tax on the rise
- The rate of employer National Insurance will increase by 1.2 percentage points, to 15% from 6 April 2025. The Secondary Threshold – the level at which employers become liable to pay National Insurance on each employee’s salary – will reduce from £9,100 per year to £5,000 per year.
- The smallest businesses will be protected as the Employment Allowance will increase to £10,500 from £5,000.
- The main rate of Corporation Tax, paid by businesses on taxable profits over £250,000, is to stay at 25% until the next election.
- Capital Gains Tax (CGT) will increase from 10% to 18% for those paying the lower rate, and 20% to 24% for those paying the higher rate.
Spending cuts
- While day-to-day spending on the NHS and education in England is to rise by 4.7% in real terms this year, nearly all other Whitehall departments have to find savings.
- One winner was the Ministry of Defence, with spending to rise by £2.9bn next year.
- Meanwhile, the Home Office plans to cut asylum support costs by more than £4bn over the next 2 years compared to the previous government’s spending trajectory.
Invest, invest, invest
- The Office for Budget Responsibility (OBR) predicts the UK economy will grow by 1.1% this year, 2% next year, and 1.8% in 2026.
- Billions of pounds have been promised to fund new infrastructure projects as well as recommitments to reform planning. In total, the Chancellor is boosting public investment by over £100 billion over the next five years across roads, rail, schools and hospitals.
- Elsewhere, capital investment will increase by £13 billion next year, taking total departmental capital spending to £131 billion in 2025-26.
Rebecca Lury, Pagefield Parter
The message from yesterday’s Budget was clear – invest, invest, invest.
Against the backdrop of a heavily briefed set of Budget announcements, Rachel Reeves stood at the Despatch Box to deliver Labour’s first Budget since 2010. It has been a long time coming, and the pressure to show that Labour can maintain stable markets has been significant.
Reeves was clear that this Budget included a number of difficult announcements, as a direct result of the decisions taken by the Conservatives during their time in power.
Whilst most of the announcements had been leaked over the preceding days – much to the annoyance of Speaker Lindsay Hoyle – Reeves was determined to hammer home the point that Labour can be trusted with the public finances.
And in a clear showing of support for ‘working people’, we saw a fuel duty freeze, a
reduction in duty on draught beer, and the commitment to increase the personal tax thresholds in 2028/29.
In contrast, policies targeting those with the highest incomes were announced, including changes to Capital Gains Tax and Inheritance Tax thresholds, and a nifty dig at Rishi Sunak, the Conservative Leader for a few more days still, with a significant increase in Air Passenger Duty on private jets.
The final part of the Budget was focused on public spending – in particular schools, and the NHS – traditional areas that we see Labour wanting to make investment, and the money announced was significant in a bid to not just prevent things getting worse, but actually improve services going forward.
It was a bold statement, but the real work for the Chancellor begins now as she and the Government bring it all into reality.
Giles Winn, Pagefield Senior Advisor and former Special Advisor to Chancellor Philip Hammond
There were five takeaways for me from this Budget:
- The Government has a huge challenge on growth. The OBR figures show growth averaging about 1.5% across the period. For the Government to achieve its own objective of securing the highest sustained growth in the G7, it needs to either better those numbers or hope the rest of the developed world has near stagnant growth over the next five years.
- This Government is subject to the same external constraints as the previous one – especially those driven by the media. Labour swerved increasing fuel duty having faced sustained pressure following the Winter Fuel Allowance cut – and they’ve gone for an eye-catching ‘penny off the pint’, disguising a hike on all other alcohol taxes.
- There’s plenty of material for the next Conservative leader. Expect to hear much more about the impact of the NICs changes on employees – with the IFS saying the cost will be borne larger by ‘working people’; ditto the impact of this on small business owners (who also have a minimum wage hike to absorb); ditto the impact on farmers of changes to agricultural property relief.
- The ‘fiscal black hole’ will continue to be used as licence to depart from previous promises/comments – e.g. not to change debt rules, not to raise NI, and not to borrow excessively. This isn’t a political point, but an observation that commitments made by Labour while in opposition should not be used as guidance for what they will do in power.
- There are still some big fights to come on departmental spending. Most departments will see a 1.5% real terms increase in spending which isn’t much more than the figures set by the last government. The next spending review in the Spring will be the flashpoint for spending battles.
Hopefully the Government has learned something about pitch-rolling. Budgets are all about expectation management – and it’s been all over the place in the past few weeks. The overall tax rise figure is more than briefed – but fuel duty will remain frozen; the Employer NICs hike is higher than expected – but income tax threshold freezes won’t be extended.
Luke Francis, Pagefield Associate Partner and former Advisor to Culture Secretary Lisa Nandy MP
When Alastair Darling delivered the last Labour Budget in 2010, it was a clear pitch to voters. Taxes on bankers’ bonuses, support for first time home buyers and a reduction in fuel duty increases. Fast-forward 14 years, and Rachel Reeves was targeting a very different audience.
Weeks of briefings and pre-announcements may have attracted the ire of the Speaker of the House Lindsay Hoyle, but the purpose was clear.
After the economic turmoil that followed Liz Truss’ disastrous mini-Budget, the Chancellor was determined to reassure the markets that there would be no unwelcome rabbits in the hat. With a General Election still a distant speck on the horizon, Reeves has taken the calculated gamble that unpopular decisions now will help to deliver steady economic growth and functioning public services long before voters return to the polls in 2029.
Providing reassurance to big business was no mean feat for a Budget widely trailed as delivering the largest tax hike in a generation. Increases in employer National Insurance Contributions were widely touted as filling the bulk of the Treasury’s £40bn blackhole while staying true – according to a parade of Party spokespeople – to the sentiment of the manifesto commitment not to increase taxes on ‘working people’. Combined with a 4% hike in Capital Gains Tax, Reeves was clear that the Government was “asking business to contribute more”.
So what happens now? With the plaster ripped off, the Government will want to take off the handbrake and go full throttle on investment. Expect the courting of big business to continue at pace as Reeves looks to deliver on her ‘invest, invest, invest’ mantra.
Cameron Brown, Pagefield Senior Advisor and former Special Advisor to Chancellor Jeremy Hunt
If the point of a Budget is to put in place policies to raise the living standards of British workers, it seems yesterday left a lot to be desired. The OBR – the Government’s fiscal watchdog – confirmed disposable income will be lower in 2029 than it is today. That is a damning indictment for any government, never mind a Labour one.
Coupled with lower forecast economic growth and higher than expected interest rates, Reeves announced the biggest tax rising Budget – in cash terms – since records began. The big losers are small and medium sized businesses already grappling with the effects of inflation, now laden with a higher living wage and a massive increase in employer National Insurance Contributions. For those in the hospitality, retail and leisure sectors, this Budget may well push many businesses into the red.
But it wasn’t all bad. After weeks of Treasury expectation management, the Budget yesterday was significantly more palatable than predicted. In a surprise move, Income Tax thresholds are set to increase for the first time in years, fuel duty frozen for the 13th year in a row, and a cut in booze duty will provide relief to many in the hospitality sector.
A massive increase in capital investment will help to repair Britain’s ailing economy in the long term. But for a Government desperate for a quick sugar rush, they may be waiting a while yet.
Speaking to one Labour adviser, they branded this fiscal event “a classic 1970s Budget.” It’s unclear whether that’s a compliment or criticism. Only time will tell…
Oliver Foster, Pagefield Chief Executive
This was a Budget of big statements – not least because it was the first to be delivered by a female Chancellor. Rachel Reeves’ message that investment to rebuild our economy is only going to come if the private sector shares the financial burden with government came through loud and clear. Now, virtually everyone (bar “working people”) is going to pay the price for a better Britain after 14 years of what Labour has dubbed Conservative failure.
While this Budget was largely about mending the public purse, it also marks the start of the Government’s plans to attract private investment into the UK – and reset our position on the global stage. Extra funding announced by Reeves to transform several sectors – including some which have already been recognised by Labour as ‘growth-driving’ – is a signal to the electorate that the Government is serious about “backing what makes Britain great”, all the while breaking down barriers to private investment.
What this statement didn’t acknowledge, though, is the potential impact of a Trump victory in next week’s US election – and that’s directly relevant because of the uncertainty that his comments about tariffs pose for British industry. Given the US is our biggest individual trading partner, tariffs on UK imports will hurt many (though certainly not all) of the ‘growth-driving’ industries recognised by Labour as key to rebuilding the UK economy.
And so depending on next week’s result, we may see the Chancellor having to return to the House of Commons to update the British public on what impact a new President may have on the chances of success for this Budget statement, only a month or two after it was first delivered…
Media reaction
“The days of tax and spend are supposed to be over, but clearly no one told Rachel Reeves. The Chancellor’s debut budget – with its sharp increases in spending, taxes and borrowing – was a budget from yesteryear.” – Larry Elliott, Economics Editor, The Guardian
“£40bn tax-raising package is bigger than any revenue-raising Budget for a generation, exceeding announcements made by Rishi Sunak in 2022, George Osborne in 2010 or Gordon Brown in 1997.” – Jim Pickard, Deputy Political Editor, FT
“So much for a Budget for growth. Despite Rachel Reeves committing to a staggering £400billion of extra spending over the next five years, Britain’s economic watchdog today predicted that economic growth will actually be lower than forecast at the last Tory Budget in March.” – Jason Groves, Political Editor, Daily Mail
“I said this morning this Budget would be big. And big is exactly what it is. We got a sense of that very early on from the Chancellor, when she said: “This Budget raises taxes by £40bn.” To state the obvious, that is a massive amount of money.” – Chris Mason, Political Editor, BBC
Key documents
