Reeves made some wise choices in the Budget but we’re only just facing up to the investment needed for the future

30 October 2024, 20:14

With a challenging fiscal backdrop, the UK’s first woman Chancellor, Rachel Reeves, made some wise, level-headed calls at the government’s Budget today.

The new government has promised to deliver a "decade of national renewal", repairing what has broken and rebuilding what has been ruined.

Sustained cuts to public services, a difficult Brexit and of course, the Truss mini-Budget has left much to do. Public investment is sorely needed given that the UK has had the lowest levels of investment in the G7 for most of the past 30 years.

The Chancellor changed the government’s fiscal rules – rules which are essentially self-imposed financial constraints on government – to enable new investment.

The new rules allow government to account for the assets they create as well as liabilities and mean that over £50bn of additional capital investment can be made within a credible economic framework.

Important investments in infrastructure projects were announced today to help drive growth in our regions, including the Leeds tram, the TransPennine rail upgrade and in Sunderland’s Crown Works.

Paired with a one-year boost to local government finances, there was reassurance for our regional economies, although there are still questions to return to later.

Elsewhere, the Chancellor held firm on Labour’s manifesto commitment to protect the payslip of working people from tax increases. Instead, she announced new revenue-raising measures including increases in capital gains tax (CGT), the tax on income from wealth, as well as increases to employer National Insurance.

The changes to CGT are a welcome step to make our tax system fairer, although there is still a way to go before different types of income are treated equally.

The uplift from increased tax revenue will be used primarily to support increased day-to-day spending for the NHS, the public’s primary concern.

Whilst overall spending in public services will rise, this hides the fact that some government departments will still face real terms cuts to budgets.

To change course on the previous government’s spending cuts as well as face up to demographic pressures, billions of additional spending has been needed, even to stand still on public services.

While the Chancellor has made wise choices today, as a country we’re only just facing up to the investment needed to rebuild and face the future. But today, we got that bit closer.

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Zoë Billingham is the director of IPPR North.

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