2024 budget: What we know and what to expect

29 October 2024, 06:00 | Updated: 29 October 2024, 06:20

Rachel Reeves will present her first Budget as Chancellor to the House of Commons on Wednesday amid reports of the tax rises and spending cuts it could contain.

The Government said after entering office that it needed to fill a £22 billion "black hole" in the public finances.

Ms Reeves is said to have since identified a far larger £40 billion funding gap which she will seek to plug to protect key departments from real-terms cuts and put the economy on a firmer footing.

Here's what we might expect from the Budget.

Private schools

From January, the Government plans to remove the VAT exemption and business rates relief for private schools to enable funding for 6,500 new teachers in state schools. The French and German ambassadors to the UK have called for international schools to be excluded from the plans.

Education and childcare

Some £1.4 billion has been announced already to rebuild crumbling schools, as well as a tripling of investment in free breakfast clubs, £1.8 billion for the expansion of Government-funded childcare, and £44 million to support kinship and foster carers.

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Bus fares

The £2 fare cap will be replaced by a £3 cap until the end of 2025. Single bus fares in England have been capped at £2 per journey (or £1.75 in London) for most routes since January 2023.

Employment

£240 million will be given to local services to get people back to work as the Government seeks to cut the welfare bill.

Social housing

Right to buy discounts for tenants of local authority-owned homes will be reduced and a £500 million top-up in funding will go to the affordable homes programme. The Government will launch a consultation on a five-year social housing rent settlement, seeking to cap what social housing providers can charge tenants in line with Consumer Prices Index inflation plus 1%.

Building homes

£128 million has been confirmed for three projects: £56 million to build 2,000 homes at Liverpool Central Docks, £25 million to establish a new fund with Muse Places Limited and Pension Insurance Corporation to deliver 3,000 energy efficient homes, and £47 million to local authorities to tackle river pollution that is preventing houses being built.

Freeports

Ms Reeves will not announce new freeports in the Budget, as was originally announced by Downing Street, but will instead confirm funding for "next steps" at five new customs sites at three existing freeports.

Debt rule

The Chancellor has already confirmed she will change the way debt is measured to open the door for the Government to spend billions more on infrastructure, such as railways, roads, hospitals and new prisons. She is expected to target public sector net financial liabilities (PSNFL) as her new measure of debt rather than the current yardstick of underlying public sector net debt.

NHS

Billions of pounds are expected to be pumped into the health service, including £1.5 billion for new surgical hubs and scanners and £70 million for radiotherapy machines. An additional £1.8 billion has been allocated for elective appointments since July.

Government departments

Ms Reeves is understood to have called on Government departments to make efficiency savings of 2% to free up billions to be reinvested in the front line.

Taxes on working people

Labour has said it will stick to its manifesto promise not to raise the major taxes on "working people": national insurance, income tax and VAT.

National insurance employer contributions

The Chancellor is expected to increase employer contributions to national insurance by at least one percentage point.

Income tax:

She is also expected to extend the freeze on income tax thresholds, which sees people pulled into paying higher rates through a process known as "fiscal drag".

Inheritance tax

Ms Reeves is reportedly considering changes to inheritance tax, which could include extending the number of years someone has to stay alive after passing on wealth as a gift from seven to 10 years.

Capital gains tax

Newspaper reports suggest capital gains tax, paid on the proceeds from selling an asset, could go up. Changes could be applied to shares or other chargeable assets.

Fuel duty

The tax, which is included in the price motorists pay for petrol at the pump, could also be raised for the first time for more than a decade. The tax on motor fuels was frozen by the Tories between 2010 and 2022, and then cut by 5p to 52.95p per litre, where it remains.

Vaping

The Chancellor is reportedly considering increasing the tax on e-cigarettes, echoing her Conservative predecessor Jeremy Hunt's plans to discourage non-smokers from taking up vaping. Vaping products are subject to VAT at 20% but, unlike tobacco, they are not also subject to excise duty.