Rachel Reeves launches £40bn tax raid as Chancellor announces massive NHS investment in historic Budget

30 October 2024, 23:31

Rachel Reeves announced £40bn in tax hikes as part of a historic autumn budget that saw massive investment into the NHS.

Labelling the £40bn rise announced on Wednesday a "difficult choice", Reeves said that “any chancellor standing here would face this reality".

As part of the announcement, Reeves welcomed the landmark Budget - the first under the new Labour government and the first ever to be written by a woman.

"Let there be no ceiling on your ambition, your hopes and your dreams," she declared, adding she took “pride” in making the historic announcement.

Read more: ‘I'm not going to tie my hands further': Rachel Reeves refuses to rule out more National Insurance hikes for employers

Read more: Rachel Reeves confirms 6.7% increase in National Living Wage in move to 'protect working people'

In a bid to fill the so-called black hole left in the economy by 14 years of Tory rule, Ms Reeves looked to business to carry the brunt of the new £40bn tax burden.

Amid a host of tax hikes, the Chancellor also chose to knock a penny off a pint at the pub, raised Carer's Allowance and the National Living Wage, as well as injecting £22.6bn into the day-to-day running of the NHS.

The Chancellor also confirmed a notable increase in Capital Gains Tax as part of Wednesday's announcement.

It came despite fears she would seek to end the freeze to raise funds in the Budget, after she warned of a £22 billion.

As part of the budget, Rachel Reeves chose to extend the fuel duty freeze as part her announcement, allaying fears that motorists would have to pay higher taxes at the pump.

Ms Reeves said she would maintain the freeze on fuel duty, which has been in place since 2011, as well as maintaining for another year the 5p cut brought in by the Conservatives in 2022.

Read more: Rachel Reeves extends fuel duty freeze at Budget as Chancellor vows 'no higher taxes at petrol pumps next year'

Read more: LIVE: Rachel Reeves reveals taxes will rise by £40bn as she vowed to 'invest, invest, invest' in historic budget

The Chancellor also increased employers' National Insurance contributions, with a 1.2% hike to 15% from April 2025, raising £25bn in total for the government.

The Budget also saw Reeves raise the National Living Wage. Employees aged 21 and over will see wages rise from £11.44 an hour, to £12.21.

Ben Kentish challenges Treasury Minister about the Budget's implications.

For those aged 16 or 17, the minimum wage will rise from £6.40 an hour to £7.55. Those aged 18-21 will also see National Minimum Wage go up, increasing from £8.60 an hour to £10 an hour.

Reactions to the budget where, as is expected, mixed.

Mayor of London, Sadiq Khan, said: "This historic Budget shows that we finally have a Government that understands the problems and opportunities London faces and is working with us here in the capital, not against us.

He also reflected on the announcement that HS2 will now terminate at Euston, describing additional funding for TFL as "fantastic".

“After all the dither and delay from the previous Government, confirming that HS2 will terminate at Euston will mean the capital can finally realise the full economic benefits of the project," he said.

“I am delighted that the Chancellor has announced additional money in London for social housing, schools and the NHS - public services that are in desperate need of investment.

The move will mean 60,000 more carers will be eligible for the benefit - the largest increase since it was introduced in the 1970s.

It is the equivalent of 16 hours at the National Living Wage per week.

"I have heard representations from colleagues across this house about the Carer’s Allowance and the impact of the current policy on carers looking to increase the hours they work," Ms Reeves said.

Reeves also promised an injection of funding for the NHS as part of the plans, with an £22.6billion cash injection in its day-to-day health budget.

Caller tells Henry Riley how the increase on taxes will 'break' her business

And where Capital Gains Tax is concerned, Reeves announced the lower rate of Capital Gains Tax will increase from 10% to 18%, with the higher rate rising from 20% to 24%.

The rates on residential property will remain at 18% and 24%.

Reeves has promised “working people” will see no increases to National Insurance in the coming five years, but couldn’t say the same thing for employers.

Speaking to the News Agents, Reeves confirmed Labour will not increase National Insurance, Income Tax and VAT for so-called “working people.”

She said: “Our commitment to those taxes of working people was for the duration of this Parliament, and we will stick by that.... National Insurance, Income Tax and VAT, we won't increase those taxes on working people for the five years of this Parliament.

“Our commitment in our manifesto was really clear. It was about the taxes that working people paid. We have stuck with those manifesto commitments today despite the massive black hole in the public finances, I've also committed to only have one budget a year.

“The last government kept coming back every few months with another budget, another fiscal event, another mini budget, and picking the pockets of people every time. I don't want to do that; I've set this budget that is now there for a year.

“We won't come back in the spring, asking for more money. We want to give business and families the confidence to plan for the future, knowing that tax rates aren't going to be chopped and changed every few months.”

However, the Chancellor refused the chance to commit to no further NI hikes for employers.

She continued: “I'm not going to tie my hands further than I already have done.“This is a significant budget. It wipes the slate clean. We're not going to need to do another budget like this again.

“This budget clears up the mess left by the party that sits opposite us now on the opposition benches. It now puts our public finances on a firm footing.”