Chancellor Rachel Reeves told a packed House of Commons that her first Budget will raise taxes by £40bn.
Reeves kicked off her first Budget by saying that the only way to drive economic growth is to “invest, invest, invest,” adding that “economic stability must be restored”.
Labour claimed the Budget will “restore economic stability and begin a decade of national renewal”, providing a boost to public investment by more than £100bn over the next five years across roads, rail, schools and hospitals while keeping debt on a downward path.
A £22bn black hole
The Chancellor blamed the state of the UK’s finance and public services on the previous Conservative government and confirmed that her Budget would raise taxes by £40bn.
She said: “The British people have inherited their failure, a black hole in the public finances, public services on their knees, a decade of low growth and the worst Parliament on record for living standards.”
Reeves pointed to the “£22bn black hole” in the UK’s finances and claimed that Treasury reserves were spent three times over three months into the last financial year.
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She confirmed that her Budget included £11.8bn for victims of the infected blood scandal, and £1.8bn to compensate victims of the Post Office scandal. She claimed the Conservatives had failed to Budget for compensation in either case.
GDP growth
Reeves confirmed that the inflation target of 2% is staying and talked through the Office for Budget Responsibility’s (OBR’s) forecasts for inflation. The OBR predicts inflation will average 2.5% this year, 2.6% in 2025, then 2.3% in 2026, 2.1% in 2027, 2.1% in 2028 and 2% in 2029.
The Chancellor also confirmed the OBR’s forecasts for GDP growth: 1.1% in 2024, 2% in 2025, 1.8% in 2026, 1.5% in 2027, 1.5% in 2028, and 1.6% in 2029.
Reeves said the Budget would mark “an end to short-termism” and that the OBR would from now on provide a 10-year growth forecast in addition to its analysis of the Budget.
Investment in public services
Reeves announced an extra £22.6bn for day-to-day spending on the NHS in England, and a £3.1bn boost to the budget for investment.
She also said £6.7bn had been allocated for education investment next year, with £1.4bn earmarked for rebuilding more than 500 schools.
Simon Rothenberg, Partner at Blick Rothenberg, said: “Rachel Reeves has put all her eggs into the investment-will-deliver-growth basket. If the global economy enters a recession and tax take is lower than expected, given the promises made here, she will struggle to reverse. I hope this isn’t the case and that her plans do deliver the investment and growth we all need to improve the economy.”
This article was first published on Mortgage Solutions‘ sister site, YourMoney.com. Read: Autumn Budget 2024: Reeves claims Labour ‘inherited a black hole’ – but said the economy will grow.
