Autumn Budget 2024: Laying the Foundations for Economic Stability and Growth

The Autumn Budget 2024, presented by Chancellor Rt Hon Rachel Reeves , represents Labour’s return to power and is aimed at economic reform, investment in public services, and strengthening support for working families. Here, the budget’s major areas, offering key details, percentages, and figures that reflect the government’s fiscal vision and commitment to both short and long term prosperity.

Strengthening Fiscal Stability and Transparency

To restore economic confidence, the government introduced a revised fiscal framework underpinned by two key rules:

• Stability Rule: Ensures that by 2029-30, the current budget balances day-to-day spending with revenues, reducing dependency on operational borrowing. The Office for Budget Responsibility (OBR) anticipates a current budget surplus by 2027-28, putting the UK’s finances on a sustainable path.

• Investment Rule: Targets a reduction in public sector net financial liabilities (PSNFL) relative to GDP by 2029-30. Including financial assets like student loan repayments and other receivables, PSNFL provides a comprehensive picture of the UK’s financial position, which is anticipated to decline by 1.1% by 2028.

To promote economic stability, only one major fiscal event will be held per year. Spending reviews every two years will set departmental budgets for a minimum of three years, providing more predictability for government departments. Overall, these measures aim to foster a business-friendly environment by reducing policy uncertainty, helping households and companies make long-term financial decisions.

Addressing Cost-of-Living Pressures and Supporting Working Families

To mitigate the impacts of inflation and rising costs, the government has implemented measures to support workers, pensioners, and low-income families:

• National Living Wage Increase: The wage will increase from £11.44 to £12.21 per hour for workers over 21, providing an additional £1,400 annually for full-time minimum wage workers and benefitting over 3 million people.

• Household Support Fund Extension: An additional £1 billion will be added to the fund for 2025-26, helping local authorities support low-income families facing immediate financial hardship.

• State Pension Triple Lock: This commitment remains, with pensions set to rise by 4.1%, aligned with average earnings, providing pensioners an additional £470 annually.

• Income Tax Threshold Adjustments: While basic, higher, and additional rates will remain unchanged, income tax band thresholds will rise with inflation after 2028, preventing fiscal drag where higher wages push people into higher tax bands without real increases in purchasing power.

Additional measures for specific sectors include freezing fuel duty and extending the 5p cut, which is expected to save the average car driver £59 in 2025-26, and increases to National Insurance rates for employers, which are projected to raise an estimated £25 billion annually.

Boosting Investment for Long-Term Growth

With a commitment of over £100 billion in capital investments over the next five years, the government aims to unlock growth through strategic funding in infrastructure, housing, and innovation:

• Public Sector Net Investment (PSNI): Expected to average 2.6% of GDP through 2029-30, reversing the previously planned decrease to 1.7%. The OBR projects that this sustained public investment will result in a 1.1% GDP boost in the long term, creating a more competitive and productive economy.

• Housing and Infrastructure: Funding will facilitate the construction of 1.5 million new homes and provide critical infrastructure upgrades, including a commitment to the trans-Pennine rail line upgrade and tunnel work for HS2’s connection to Euston station.

• Research and Development (R&D): Record-high investment in R&D will strengthen the UK’s innovation sector, particularly in areas like climate technology, which aligns with the government’s plan to support clean energy initiatives. The R&D budget is set to crowd in private sector investment, with every £1 increase in public spending projected to result in a £0.30 rise in private investment.

A newly established National Infrastructure and Service Transformation Authority (NISTA) will work to ensure that these investments meet high standards of delivery and provide value for money.

Reforms to the Welfare and Health System

With the goal of making the welfare and healthcare systems more sustainable and effective, the budget includes various reforms:

• Welfare Cap: A new welfare cap for 2029-30 will ensure spending remains under control, with fraud-prevention measures projected to save £4.3 billion annually by 2029-30.

• Additional NHS Funding: The Department of Health and Social Care will see an additional £22.6 billion for 2025-26, allowing for 40,000 weekly elective appointments and improved waiting times. The NHS infrastructure budget includes £1.5 billion for essential maintenance and upgrades, with a focus on reducing backlogs.

• Healthcare Modernisation: An investment of £1 billion will increase NHS bed capacity, and an additional £1.4 billion will be allocated to rebuild schools and ensure healthcare services are equipped to meet growing demand. These updates will contribute to a healthier workforce and reduce economic inactivity.

Climate and Environmental Measures

In line with its commitment to achieving net zero by 2050, the budget includes targeted investments to transition towards greener energy sources:

• Energy Profits Levy (EPL): The levy will increase from 35% to 38% on oil and gas company profits, which is expected to generate additional revenue while supporting the clean energy transition.

• Incentives for Electric Vehicles: Enhanced Vehicle Excise Duty (VED) differentials for electric vehicles and hybrids, along with extended allowances for EV charge points, will encourage consumers to shift towards cleaner vehicle options.

Supporting Business Competitiveness and Fairer Taxation

Recognising the need for a balanced tax system, the budget includes several measures designed to support small businesses and address tax loopholes:

• Employment Allowance Increase: The allowance for employers’ National Insurance will rise from £5,000 to £10,500, benefiting 865,000 businesses, which will pay no NICs next year.

• Corporation Tax Freeze: The main rate of corporation tax will remain capped at 25%, the lowest in the G7, until the next election, fostering a competitive business environment.

• Capital Gains Tax (CGT): Rates will increase from 10% to 18% for basic rate taxpayers and from 20% to 24% for higher-rate taxpayers on share sales, aiming to close tax gaps while keeping rates competitive.

Private jet users will see a 50% increase in Air Passenger Duty from 2026-27, and buy-to-let landlords and second-home buyers will experience a 5% stamp duty surcharge.

Economic and Inflation Outlook

The OBR projects steady economic growth, with GDP expected to increase by 1.1% in 2024, 2.0% in 2025, and 1.8% in 2026. Inflation, which has posed challenges in recent years, is anticipated to stabilise, averaging 2.5% in 2024 and reducing gradually to meet the 2% target by 2026. These expectations signal a return to more stable pricing, which will help households manage costs and improve overall living standards.

The Autumn Budget 2024 sets a transformative path, balancing fiscal prudence with essential investments. Through targeted support for families, infrastructure enhancements, and a commitment to long-term environmental goals, this budget lays the groundwork for an economically stable and socially equitable future for the UK. By prioritising responsible investments and transparency, the UK is positioned to strengthen its economy, support working families, and build a resilient nation ready for sustainable growth.