The Labour party have announced a tax rise worth £40 billion in their first budget back in power.
Chancellor Rachael Reeves, who delivered the Budget speech in the House of Commons this afternoon, argued the tax rise would be invested in protecting public services amid the struggling NHS and Brexit having damaged British business.
Prime minister, Kier Starmer, took to social media this morning to announce: “After 14 years of decline, we will invest in our country – rebuilding our schools, hospitals and roads.
“We wont shy away from the tough decisions to grow our economy and protect working people’s payslips.”
As a result, employers will be the main ones taking the hit with National Insurance contributions rising from 13.8% to 15% from April. Employers will start paying this on salaries of over £5,000 a year, rather than the current £9,1000 per year.
This extra financial burden to employers will likely come out of businesses profits, cause wage cuts, reduced bonuses, or potential redundancies for employees and may even cause increased costs to consumers.
For the working class, rates of income tax and National Insurance paid by employees, will remain unchanged, whilst wages are set to rise from April.
The National Living Wage for employees aged 21 and over, will rise from £11.44 an hour to £12.21, whilst the National Minimum wage for those aged 18-20 will go up from £8.60 an hour to £10.
The Minimum Wage for those aged 16-17 will be up from £6.40 to £7.55 an hour.
The Labour party estimate that this will boost the payslips of approximately three million workers, in what Reeves says will be a significant step towards Labour’s promise of a “genuine living wage” for workers.
She added plans to “Get Britain Working” by aiming to get the unemployed back into jobs, and to ease the strain on the benefits system.
The Office for Budget Responsibility predict that overall GDP growth will be 1.1%.
The choices I have made today are the right ones for our country.
To restore stability to our public finances, protect working people, fix our NHS and rebuild Britain.
If the Tories disagree with these then they must answer:
What choices would they make? pic.twitter.com/gyx8PvrWhS
— Rachel Reeves (@RachelReevesMP) October 30, 2024
In order to protect public services whilst trying to grow the economy, a £3.1 billion increase in the budget, as well as an extra £22.6 billion for day-to-day spending will be put towards the NHS in England.
This is the largest health budget outside of Covid in over a decade and will aim to help cope with the backlog of patients and high demand for appointments.
Furthermore, £6.7 billion will be invested in the Department of Education, with over £1.4 billion of this being used to rebuild 500 schools.
Staying on the topic of the education sector, there will be a £1 billion increase to support children facing special educational needs and disabilities.
Today’s Budget will deliver on the promise of change.
Fixing the foundations of our economy.
Investing in our future.
Rebuilding Britain.
— Rachel Reeves (@RachelReevesMP) October 30, 2024
On the roads, the Labour party have dedicated an extra £500 million for local road maintenance to put towards repairing an additional one million potholes each year.
The Labour party also mentioned increasing the £2 cap on single bus fares to £3 – increasing costs for those who rely on public transport from January.
For those owning their own vehicles, she announced that the party will freeze fuel duty and maintain the existing 5p-a-litre cut for another year.
Reeves also mentioned multiple commitments to improving Britain’s rail services.
This includes plans to fund a high-speed rail line from West London to Euston station in the centre of London, alongside plans to connect some of Britain’s cities and towns up through rail lines.
This involves commitments to upgrading the trans-Pennine rail line which will connect York, Leeds, Huddersfield and Manchester together, as well as creating an East to West Rail to connect up Oxford, Milton Keynes and Cambridge.
She announced plans to cut tax on draft alcohol by 1.7% in order to support pubs, whereas tax rates on non-draught products will increase in line with RPI measures from February.
Tax on tobacco will increase by 2% above inflation, and on hand-rolling tobacco by 10%, alongside the introduction of a new tax of £2.20 per 10ml of vape liquid from October 2026.
When it comes to choices on tax, this government chooses to protect working people every single time.
— Rachel Reeves (@RachelReevesMP) October 30, 2024
A promise made.
A promise delivered.
From the Budget, it’s clear that employers and the wealthiest will find these changes the toughest, with 20% VAT being added onto tuition fees at private schools. This will be implemented from January 2025.
The richest will also pay more in terms of stamp duty as those who purchase second homes which will face the rise from 3% up to 5%. This will be in action from tomorrow.
Targeting the richest again, Air Passenger Duty on private jets will also increase by 50%.
In opposition to Reeves’ speech, Rishi Sunak, leader of the Conservative party, expressed feelings that the Labour party didn’t make the right decisions in reference to the huge £40 billion tax rise which will have a detrimental impact on businesses, and in turn, the working class.
Despite all these changes to be introduced, the Office for Budget Responsibility predict the plans from this years Autumn Budget will ultimately “leave GDP largely unchanged in five years”.
For more information on this year’s Autumn Budget, click here.