3.52pm: Budget ‘latest blow for hospitality businesses’
Reactions to Reeves' Budget from the hospitality industry have not been overly positive.
While she declared a 1.7% cut to the duty on draft alcoholic beverages and a semi-continuation of business rates relief, increases to employers’ National Insurance Contributions (NICs) and the minimum wage at 1.2 percentage points and 6.7% respectively will do a lot of work in offsetting the good contents of the Budget.
For trade body UKHospitality, the Budget “is the latest blow for hospitality businesses”.
“Rising taxes, increasing costs and fragile consumer confidence risk bringing growth to a grinding halt.
“In the short-term, the tsunami of employment costs coming in April will ultimately do more to hamper growth than incentivise it.
3.20pm: AIM rallies on IHT relief
AIM shot up by 4% as investors in the junior market celebrated a reprieve from a potentially crippling inheritance tax blow.
Fears ahead of the Budget had been that an inheritance tax exemption for AIM shares would be removed sparking a rash of selling and removing one of the market's key supports.
However, the Chancellor kept the relief albeit reduced it by half to 20%, which was still much better than expected.
Broker Peel Hunt estimates there is around £6 billion in funds created for AIM stocks with inheritance tax relief, while individuals have about £5 billion directly invested.
Removing this money would have likely led to share prices dropping by between by 20-30%, said the broker.
2.03pm: Inheritance claims are ‘ludicrous’, says Sunak
Sunak says the OBR has declined Reeves’ claims of a £22 billion black hole in public finances left behind by the Tories.
He said: “You only need to look at the facts to see that the Chancellor's claims about her economic inheritance are nonsense.
“Labour inherited an economy with inflation back at its two per cent target, mortgage rates being cut, and unemployment low.
“When we left office, the United Kingdom was the fastest growing advanced economy in the world.”
Labour’s claims about their inheritance are “purely ludicrous”, said Sunak.
He said the Budget “doesn’t balance the books”, taking at at higher debt levels and higher inflation expectations.
1.57pm: ‘Broken promises’
Sunak says Budget contains “broken promise after broken promise”.
Reeves’ Budget “reveals the simple truth that the Prime Minister and the Chancellor have not been straight with the British people time, time and again”, said Sunak.
“Time and again, we Conservatives warned Labour would tax, borrow and spend far beyond what they were telling the country. And time and again, they denied they had such plans. But today, the truth has come out, proof that they plan to do this all along.”
1.54pm: ‘Delivering change, rebuilding Britain’
Here’s how Reeves signed off her Autumn Statement: “This is a moment of fundamental choice for Britain. I have made my choices, the responsible choices to restore capacity to our country, to protect working people, more teachers in our schools, more appointments, more homes being built, fixing the foundations of our economy, investing in our future.
Delivering change. Rebuilding Britain. We, on these benches, commend those choices, and I commend this statement to the house.”
1.51pm: NHS, green-energy commitments confirmed
Labour will fund 11 new green hydro projects. Reeves confirmed the establishment of GB Energy, to be headquartered in Aberdeen.
A £6.7 billion commitment to the Department for Education has been confirmed alongside a £22.6 billion increase to day-to-day health budget for the NHS.
Reeves said additional funds will go to more beds and more diagnostic centres.
“This is the largest real terms growth in day to day NHS spending outside of COVID Since 2010,” said Reeves.
Labour want to bring the waiting times target down to 18 weeks.
1.46pm: Bus cap
Labour will increase the bus fare cap to £3, Reeves has confirmed.
1.42pm: Labour commits to major investments
Reeves has rattled off a litany of spending commitments under the National Wealth Fund. These include:
- £1 billion for the aerospace sector
- £2 billion for the EV auto industry
- £520 million for a new life sciences fund
- Additional tax reliefs for visual effects sector in TV and film
- £6.1 billion in core research funding
- £5 billion to housing plans. Affordable homes programme upped to £3.1 billion
- Right-buy-buy discounts reduced
- £1 billion to remove dangerous cladding following Grenfell
On transport:
- Transpennine upgrades across the North are confirmed and electrification of services confirmed
- East-West rail between Oxford, Milton Keynes and Surrey confirmed
- HS2 will go to Euston, Labour has confirmed
- Money will also be committed to fixing potholes
1.31pm: Devolution in focus
Reeves said: “I am today providing funding to support public services and drive growth across Scotland, Wales and Northern Ireland, having discussed the matter with the First Minister of Wales, Mair Eluned Morgan, and my honorable friends for clinically and Pontypridd, I am today providing £25 million to the Welsh Government next year for the maintenance of coal pits to ensure that we keep our communities safe and to support growth, including in our rural areas.
“We will proceed with city and growth deals in Northern Ireland, in Causeway coast and Glens and the Mid South West, and we will drive growth in Scotland, a key priority for Scottish Labour leader, Anas Sarwar, including with a city and growth deal in Argyll and Bute.
“This budget provides the devolved governments with the largest real terms funding settlements since devolution, delivering an additional £3.4 billion to the Scottish Government through the Barnett formula funding, funding which must now be used effectively in Scotland to deliver the public services that the people of Scotland deserve.
“This budget also provides £1.7 billion to the Welsh Government and £1.5 billion to the Northern Ireland executive.”
1.28pm: Shoplifting crackdown
Labour will scrap immunity for low-value shoplifting offences implemented by the Tories. Additional funding committed to crack down on the organised gangs which target retailers.
1.26pm: 2.5% of GDP to be committed to defence.
UK government will exceed NATO commitments, with billions committed to Ukraine using “immobilised Russian assets”.
1.26pm: 2.5% of GDP to be committed to defence
UK government will exceed NATO commitments, with billions committed to Ukraine using “immobilised Russian assets”.
1.23pm: Personal tax thresholds will be uprated in line with inflation from 2028
Reeves said: “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.
“Having considered this 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. I am keeping every single promise on tax that I made in our manifesto.
“There will be no extension of the freeze in income tax and National Insurance thresholds beyond the decisions by the previous government.”
1.20pm: Windfall taxes to go up, carried interest rises confirmed
The energy profit levy will go up to 38%, expiring in March 2030.
Carried interest in the private equity sector will increase to 32% from 2025.
VAT will be applied to private school fees from 2025.
1.16pm: Pints to be cheaper, non-dom tax scrapped
Labour will introduce business reliefs for high-street businesses, but the most-valuable properties will pay a higher multiple.
There will be a 40% relief up to £110,000 per business.
Non-draft alcohol tax rates will increase at RPI rate, but draft duty will be cut by 1.7%, to rapturous cheers.
The non-dom tax regime will be scrapped for a new resident’s regime.
1.13pm: Capital gains tax to increase, IHT freeze maintained
Capital gains tax will increase to 18% on the lower rate and 24% on the higher rate
The IHT freeze will be extended until 2030, but inherited pensions will be captured by IHT. IHT reliefs on AIM stocks will be maintained.
1.07pm: Employer NIC will go up
“We will increase the rate of employers national insurance by 1.2 percentage points to 15% from April 2025 and we will reduce the secondary threshold, the level at which employers start paying national insurance on each employee's salary, from £9,100 a year to £5,000.
This will raise £25 billion pounds per year by the end of the forecast period. I know that this is a difficult choice. I do not take this decision lightly.”
1.04pm: no fuel duty
Labour has confirmed that the fuel duty will not increase in 2025.
Labour has also confirmed election pledges of no NI increases, no VAT increases and no income tax increases.
1pm: Minimum wage, pension increases confirmed
The National Minimum Wage is confirmed to go up by 6.7% to £12.21. 18-20-year-olds will see their wage go up more than 16% under plans to move towards a ‘single adult rate’.
The carer’s allowance will see the largest increase since 1976- to £10,000.
Labour will modernise HMRC systems, will clamp down on worker exploitations and increase interest rates on tax debt.
Labour has committed to the pension triple lock. The basic and new state pension will be uprated by 4.1%.
The pension credit standard minimum guarantee will also rise by 4.1% from around £11,400 per year to around £11,850 a year for a single pensioner.
12.53: Seven pillars
Labour will not borrow to cover day-to-day spending.
Reeves outlined ‘seven pillars’:
“First and most important is to restore economic stability. That is my focus today.
“Second, increasing investment and building new infrastructure is vital for productivity. So we are catalysing £7 billion of investment through our national wealth fund, and we are transforming our planning roles to get Britain building again.
“Third, to ensure that all parts of the UK can realise their potential, we are working with the devolved governments and partnering with our mayors to develop local road plans.
“Fourth, to improve employment prospects and skills. We are creating Skills England, delivering our plans to make work pay and tackling economic inactivity.
“Fifth, we are launching our long-term modern industrial strategy and expanding opportunities for our small and medium-sized businesses to grow.
“Six, to drive innovation, we are protecting record funding for research and development to harness the full potential of the UK science base.
Finally, to maximize the growth benefits of our clean energy mission, we have confirmed key investments such as carbon capture and storage to create jobs in our industrial Heartlands.”
12.51pm: 2% inflation target maintained
Labour will maintain 2% inflation target, said Reeves.
The OBR has forecast that CPI inflation will average 2.6% in 2025 while the 2% target will not be reached until 2029.
Reeves pledged an end to “short-termism”. Real GDP growth will be 2% in 2025, 1.5% in 2027 and 2028, 1.6% in 2029.
Budget will boost long-term growth, said Reeves.
12.44pm: Funding for those affected by infected blood, Horizon scandals
Labour will publish a line-by-line breakdown of the £22 billion black hole left by the Conservatives.
Reeves accused the party of hiding their public spending plans. While calling for an early election to escape liability.
“Never again will we allow our government to play fast and loose with public finances,” said Reeves.
“They had no plan to improve our public services, and they had no plan to put our public finances on a stable footing. Quite the opposite.
“Since 2021 there have been no detailed plans for departmental spending set out beyond this year, and their plans relied on a baseline for spending this year, which we now know was wrong, because it did not take into account the £22 billion black hole.”
She has pledged billions of pounds of support to those affected by the infected bloom and Horizon post office scandals.
12.40pm: Reeves takes to stage
“The country voted for change,” said Reeves. She wants to “fix the foundations” with “responsible leadership”, investment and economic stability.
Reeves said she is “deeply proud” to be the first female Chancellor of the Exchequer.
The Tories “broke our National Health Services” she said, while taking a swipe at austerity.
12.30pm: Labour’s ‘number one mission is growth’
On homelessness, Starmer said levels are “far too high”. He pointed to Labour’s strategy of increasing social housing and removing no-fault evictions.
On food security and backing British farming, Starmer said “no one did more damage to rural communities” than the previous administration.
Starmer said Labour’s “number one mission is growth”.
He said the government will make drink spiking a specific criminal offence.
12.22pm: Starmer on Gaza, Sudan and climate change
LibDems leader Ed Davies implored Starmer to commit to “seize back world leadership in clime change”.
Starmer said he will. “Climate is one of the biggest challenges we face,” he said.
Davies asked Starmer for support to end the conflict in Sudan.
Labour MP Rachael Maskell asked Starmer to commit to a pensioner poverty taskforce.
Starmer called the state of poverty “truly appalling”.
Starmer refused to call out Israeli aggression against the Palestinians as genocide. He called it a “humanitarian catastrophe”.
12.16pm: Sunak is moving to Yorkshire
Former Prime Minister Rishi Sunak opened with some softball requests of Starmer to commit to greater state school support for cricket initiatives. Starmer agreed.
Starmer also committed to great support for the British tech industry, stability in Northern Ireland’s Stormont parliament, support for Ukraine against Russian aggression and NATO cooperation.
Sunak confirmed that he is moving to the greener pastures of Yorkshire. He said he is proud of becoming the first British-Asian Prime Minister.
The atmosphere is decidedly jovial in this PMQs, perhaps because of the high spirits surrounding today’s Diwali celebrations.
12.05pm: PMQs commence
Prime Minister Keir Starmer is fielding questions from the opposition in a pre-Budget round of PMQs.
Earlier today, Starmer Tweeted that “this is a huge day for Britain”.
“After 14 years of decline, we will invest in our country - rebuilding our schools, hospitals and roads.
“We won’t shy away from the tough decisions to grow our economy and protect working people’s payslips.
“There is a brighter future ahead.”
This is a huge day for Britain.
After 14 years of decline, we will invest in our country - rebuilding our schools, hospitals and roads.
We won’t shy away from the tough decisions to grow our economy and protect working people’s payslips.
There is a brighter future ahead.
— Keir Starmer (@Keir_Starmer) October 30, 2024
11.46am: Reeves leaves Number 11
Chancellor Rachel Reeves is en route to parliament after leaving Number 11 to deliver Labour’s first Budget in 14 years.
Chancellor @RachelReevesMP has left Number 11 to deliver her first Budget. pic.twitter.com/SN8MYK0rzm
— HM Treasury (@hmtreasury) October 30, 2024
11.30am: ‘Most consequential Budget in a decade’ approaches
Today’s Autumn Statement from Labour Chancellor Rachel Reeves “may be the most consequential Budget for a decade”, according to the National Institute of Economic and Social Research (NIESR)’s senior economist Ben Caswell.
“It’s the new government’s first major opportunity to define its economic vision for the UK and put some meat on the bones of some of its key manifesto pledges,” he added.
Non-profit organisation NIESR is advocating for an increase in the personal tax-free allowance “in order to reduce the tax burden on those in work who currently earn the least and to offset the effect of potential reductions in labour demand arising from the increase in employer NICs (National Insurance Contributions)”.
That is unlikely to happen, since Labour has stated that income tax thresholds will not be changed.
Instead, Reeves is expected to announce a round of wealth tax increases, with the likely contenders for change being capital gains tax, inheritance tax and pension withdrawal limits.
Wednesday 10.52am: UK gilt yields fall pre-Budget
The price of government bonds rose this morning in a faint sign of optimism prior to Labour Chancellor Rachel Reeves’ Autumn Statement.
The 10-year gilt yield – which has an inverse relationship to its price – fell from 4.32% yesterday to 4.23% at the time of writing.
However, gilt prices are still down from three months ago, when the yield was closer to a flat 4%.
AJ Bell’s investment director Russ Mould said these discounted prices mean “the bond market has already braced itself for higher levels of government borrowing”.
Mould predicted a Budget “that’s a burden on business”.
He said: “The prospect of a higher rate of employer National Insurance, a rise in the minimum wage and changes to employment rights will all drive up costs.
“That’s likely to be seen as negative for job creation, wages and consumer prices, and businesses will inevitably pass on extra costs to the customer.”
Tuesday 4.12pm: Will you be paying more tax from tomorrow?
Let's have a look at the biggest stakeholders in the possible changes to the UK tax system ahead of tomorrow's Budget.
- Inheritance tax proposal: Potential removal of exemptions and allowances
- Only about 4% of estates currently meet the IHT threshold of £325,000. However, assets left to spouses or civil partners and specific charitable donations are usually exempt from IHT, but this could change from tomorrow.
- Capital gains tax proposal: Possible rate increase on share sales.
- CGT is paid by individuals, trusts and businesses when they sell assets like property (excluding primary residences), shares, or valuable items at a profit. The 1-2% of taxpayers that typically pay CGT might see their taxes go up.
- Carried interest tax proposal: Change the tax burden from CGT to income tax
- Private equity fund managers currently pay income tax on profits made from investments above a certain ‘hurdle rate’. Switching to income tax will result in a significantly higher tax charge.
- North Sea windfall tax proposal: Raising the energy profits levy from 35% to 38%.
- This will apply to companies like BP, Shell, and other energy firms that extract fossil fuels from this area.
- Pay-per-mile tax proposal: Charging per mile driven, offsetting revenue loss from fuel tax with EV rise.
- All vehicle drivers will be subject to PPM tax if implemented
- Pension tax proposal: Lowering the tax-free withdrawal limit
- Withdrawals above the 25% tax-free allowance are currently subject to income tax. Reducing this will hit pensioners with a greater tax burden
- Banking tax proposal: A higher levy and surcharge on banks, impacting bank profits.
- The UK banking levy and banking surcharge are paid by larger UK-based banks and building societies, including Barclays, HSBC, and Lloyds.
- Non-dom tax rules proposal: There will likely be an end to non-dom tax exemptions
- Non-domiciled UK residents, in which there are fewer than 100,000.
- Stamp duty proposal: Reeves is reportedly set to scrap existing stamp duty exemptions put in place by short-lived Tory Prime Minister Liz Truss.
- More homebuyers are likely to be captured by stamp duty in the future
Tuesday 3pm: Rolls-Royce chief warns Reeves: Don’t stymie economic growth
Rolls-Royce Group Holdings plc chief Tufan Erginbilgic has advised Labour Chancellor Rachel Reeves to avoid policies that could hinder economic growth ahead of her maiden Budget.
Speaking with The Telegraph, Erginbilgic called on Reeves to support British technological advancements, including Rolls-Royce's development of small modular reactors (SMRs).
He said: “If you look at the UK, it has been lagging behind key competitors. So I think whatever the policies are, we should make sure that they actually support economic growth – and that is the big point.
“It needs to support productivity improvements, therefore infrastructure is important. That’s hopefully what the Budget will do, rather than policies which may actually get in the way of economic growth.”
Rolls-Royce has signed a swathe of SMR deals recently including one with state-owned Czech utility company ČEZ Group and other reported deals across Sweden and The Netherlands.
Tuesday 2.23pm: Carried interest changes on the way
Changes to the carried interest taxation regime appear to be bolted onto Labour Chancellor Rachel Reeves’ Autumn Statement.
But depending on the recipe, changes to this confusing pocket of the private equity sector risk putting an unfair burden on a key growth engine in the UK mid-market funds space.
According to Victoria Price, a managing director in Alvarez and Marsal’s private capital team, there is a concern that a “one-size-fits-all approach is taken” that could impact “investment and funds that really help entrepreneurial businesses scale in the UK”.
Mid-market funds, Price added, “invest in UK assets that create employment in the UK, that help the economy in the UK significantly, as compared to some of the very bigger funds, where not all of the benefit is felt in the UK”.
Price explained to Proactive how managers at mid-market PE firms tend to stump up more of their own capital compared to the big hitters.
“If you take it on a pro-rata basis, then they are putting in more of their own funds, and they have more of their own capital at risk,” she said.
This is important because while a case can be made that carried interest resembles income and should be taxed as such, the case is harder to make on funds invested by the PE managers themselves.
Thankfully there is the possibility, if not likelihood, that Reeves will acknowledge this in tomorrow’s Budget.
The two likely scenarios seem to be:
- Switch the tax burden on carried interest from capital gains to income, but with an exemption for PE fund managers’ own capital, or
- Increase the capital gains charge across all carried interest by a few percentage points
Tuesday 9.07am: Hospitality and retail sectors face rising wages
Labour Chancellor Rachel Reeves is expected to announce a 6% increase in the national minimum wage during tomorrow’s Autumn Statement.
It will bring the current rate of £11.44 per hour up to £12.13 per hour.
While great news for low-paid workers, there are concerns that the burden will be felt in the hospitality and retail sectors, which are heavily reliant on minimum-wage workers.
These sectors have been pleading with Reeves for business rates relief, although there have been no indications that she will address these concerns.
In addition, there is the possibility that Reeves will implement and National Insurance Contribution (NIC) charge on employer pension contributions.
Berenberg analysts highlighted that the anticipated addition of NICs to employer pension contributions largely just reverses previous employer social contribution cuts by the previous government.
However, a sizeable increase in the minimum wage “will add to cost pressures in sectors that rely on low-paid labour such as hospitality and retail”.
Tuesday 7.35am: Budget fears a boon for Hargreaves Lansdown
Retail investment platform Hargreaves Lansdown PLC (LSE:HL.) saw increased customer inflows into tax-advantaged accounts like SIPPs and ISAs over the past three months thanks to anxiety over tomorrow’s Autumn Budget from Labour Chancellor Rachel Reeves.
Net client growth for the quarter ending 30 September totalled 18,000, more than double the same period last year.
This led to higher dealing volumes and a 7% increase in total revenue.
Sarah Coles, head of personal finance, Hargreaves Lansdown said: “The Budget has inspired a record-breaking six months for saving and investing, as people have been reminded just how valuable their ISA and pension allowances are, and rush to make the most of them while they know where they stand.
“It’s the biggest year ever for the number of people paying into their SIPPs, JISAs and LISAs, and the second biggest for ISAs – after the pandemic peak in 2022.
“It’s a great sign that people are taking sensible steps to prepare for whatever the Budget holds in store, and it’s not too late to get stuck in.”
Monday 1pm: Keir Starmer announces 50% rise in bus fares
Prime Minister Keir Starmer offered few concrete insights into what to expect this Wednesday during a pre-Budget speech in Birmingham today, save for a repeated warning that tough decisions will be made.
“The time is long overdue for politicians in this country to level with you honestly about the trade-offs this country faces,” he said.
“Working people know that hard choices are necessary. They lived through the Liz Truss episode. They lived through the cost-of-living crisis.
“So they know that the things they want from us – protecting their living standards, building our nation, fixing our public services – they know that this can only be achieved alongside economic stability.”
This is a landmark week for Britain.
For the first time in 15 years, our Budget will put working people first.
The truth is, the Tories left you to pay the price for their chaos.
We will clear up their mess. Step up in tough times, not stand back.
We will deliver change.
— Keir Starmer (@Keir_Starmer) October 28, 2024
One thing he did disclose, which is likely to ruffle some feathers, is an increase in the bus fare cap to £3 from next week.
He stated: “On the £2 bus fare, the first thing to say is the Tories had only funded that til the end of 2024 and therefore that is the end of the funding in relation to the £2 capped fair.
I do know how much this matters, particularly in rural communities where there’s heavy reliance on busses, and that’s why I’m able to say to you this morning that in the budget, we will announce there will be a £3 cap on bus fares to the end of 2025 because I know how important it is. So that will be there in the budget on Wednesday.”
“Starmer must think people who get the bus aren’t working people,” chided shadow transport secretary Helen Whately. “That’s £10 a week extra to get to work under Labour,” she beamed from her X account.
Monday, 11am: Starmer to warn of 'unprecedented' challenges before Budget
Prime Minister Keir Starmer is set to lay out a stark picture of the UK’s economic state in a speech on Monday ahead of this week’s Autumn Budget.
According to the BBC, Starmer will warn of “unprecedented” economic challenges and the “harsh light of fiscal reality” whilst speaking in the West Midlands. “It’s time we ran towards the tough decisions,” he is expected to say.
Ahead of the speech, shadow health secretary Victoria Atkins reckons the Budget is "shaping up to be a budget of broken promises”.
Chancellor Rachel Reeves is facing a tough balancing act- on the one hand, Labour has pledged not to increase income tax, VAT or National Insurance contributions, leaving wealth taxes like capital gains and inheritance tax the prime candidates for change.
For a comprehensive overview of what's at stake, Proactive's Budget Primer has you covered.