Chancellor Rachel Reeves revealed the date of her first Budget today, while launching a scathing attack on the economic inheritance left behind by the Conservatives.
Speaking to the House of Commons as she unveiled her spending audit, Reeves accused the previous government of creating a £22 billion black hole in the public finances.
“Before the election, I said that we would face the worst inheritance since the Second World War… but upon my arrival at the Treasury three weeks ago, it became clear that there were things that I did not know. Things that the party opposite covered up,” she said.
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In her pre-Budget statement, the chancellor pledged to “restore economic stability” and announced a string of measures and cuts which she hopes will deliver £5.5 billion of savings this year and £8.1 billion next year.
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Cuts will include axing some road and rail projects, means-testing the winter fuel payments currently received by around 10 million pensioners, and dropping plans to reform adult social care charges.
Reeves said she would set out her fiscal plans in full alongside a spending review in a Budget statement on 30 October.
“The worst may be yet to come, as the chancellor issued an ominous warning that even more difficult decisions will be made in the Budget scheduled for the eve of Halloween,” says Myron Jobson, senior personal finance analyst at investment platform Interactive Investor.
“As such, people should strap themselves in for further twists and turns in the personal finance landscape as the government pursues a new strategy to balance the books,” he adds.
Why won’t the Budget take place until October?
After Labour was elected on 4 July, Reeves told the public that she would announce a date for her first Budget before the end of the month.
Labour had previously said it would not deliver a Budget without forecasts from the Office for Budget Responsibility (OBR), an independent public body. It takes 10 weeks for the OBR to assess the economic impact of policy announcements and produce a report.
As such, the very earliest anyone was expecting the Budget to take place was Friday 13 September, provided the government issued instructions to the OBR immediately after securing its election win the day after polling closed.
Budgets usually take place in the autumn, with another delivered in the spring.
However, Reeves revealed today that she would deliver her Budget on 30 October, the day before Halloween.
What has been announced already?
We have already had some clues as to what will appear in the government’s first Budget.
Labour made a string of pledges in its election manifesto, including plans to remove the VAT exemption on private school fees. The party also said it would crack down on tax avoidance and loopholes, including abolishing the non-dom status.
Despite the need to raise money to fund public services, Labour has said it will “not increase taxes on working people”, which means no hikes to income tax rates, National Insurance or VAT. The party has previously said it will not increase corporation tax either.
However, it is possible we will see some tax rises in other areas. Experts think capital gains tax and inheritance tax could be in the spotlight, as well as rules around how pensions are taxed.
According to Gary Smith, financial planning partner at wealth management firm Evelyn Partners, the problem with this is that none of these “wealth taxes” are huge revenue raisers on their own – “at least not without major reform”.
Labour also used the King’s Speech to outline other areas of focus – including a new Pension Schemes Bill which will look to make the retirement savings landscape more efficient and productive.
A two-stage pensions review was also launched a few days later as part of the government’s plan to deliver better outcomes for savers while boosting investment in the UK economy.
Today, Reeves’s pre-Budget statement has set out a whole host of additional measures, including:
- A move to axe universal winter fuel payments – only those receiving pension credits or other means-tested benefits will receive the payment going forward.
- A decision to axe certain infrastructure projects, including the Stonehenge tunnel, the Arundel bypass and the Restoring our Railways scheme.
- A review of Boris Johnson’s new hospitals plan, which promised to build 40 new hospitals by 2030.
- No reforms to adult social care charges.
- Plans to shelve the NatWest retail share offer until at least next year.
The government has now also confirmed that VAT will kick in on private school fees from January 2025, earlier than previously expected.
There is already a lot to digest, with today’s pre-Budget statement almost resembling a Budget in its own right. The public will be watching closely on 30 October to see what else is announced.
