The new Government’s first Budget – a historic first by a woman Chancellor too – was widely trailed in advance, leaving relatively little room for surprise. Of course, this is now a common feature of Budgets over the past decade or so (how far we’ve come since Hugh Dalton had to resign in 1947 for speaking to the press immediately before he addressed Parliament). It’s also wise message management from Labour, who have struggled to get agenda across coherently since the election.
Indeed, Labour’s choppy start in office re-framed this Budget. It was initially to be a Budget for the long-term; a demonstration of serious Government keen to tackle entrenched problems. A difficult first hundred days mean that this became wedded to a need to almost relaunch the Labour project, although the project remains a problem-solving one rather than a coherent narrative around the future of Britain. As Rachel Reeves put it herself, “every Budget I deliver will be focused on our mission to grow the economy”.
With that in mind, here’s a canter around some key announcements in a snap review:
Labour’s central pitch in the general election was that Britain’s public services are broken and in need of investment. More Government spending is thus required, but there are fiscal rules to be adhered to. But it’s easy enough to redefine these things, and the Chancellor has done so in a reasonable way, allowing access to additional borrowing. We’re a ‘persnuffle’ country now (PSNFL, Public Sector Net Financial Liabilities).
There were also clear manifesto commitments on tax, so some alternative ways to raise revenue had to be found. An increase in Employers’ NI was widely predicted, and formed the largest tax rise in the entire budget at £25bn, It won’t be welcomed by employers and we can expect a vocal backlash on this in the coming days from business. Over time, the cost will probably be absorbed in lower pay rises (and so a lower rate of income tax receipts) or lower profits (and lower capital gains tax receipts). But that’s tomorrow’s problem. Capital gains tax is going up, and so are a plethora of targeted taxes. Some are classic Pigovian taxes to discourage bad habits (vaping and smoking), others involve a tightening of rules (inheritance tax). Taken together, the Institute for Fiscal Studies claims this is the biggest tax-raising Budget since 1993 and should net c.£40bn.
An additional £500m has been announced for affordable housing, taking the total budget to £3.1bn in 2025/26, as part of a broader £5bn package of housing investment.Local authorities will also now keep 100% of the receipts from right to buy purchases. This will be welcomed by local councils struggling with growing waiting lists and ever-higher expenditure on homelessness. However, how and when it will be divided among local authorities will determine whether it will be sufficient to meet the ever-growing demand or simply stem the tide. The devil is always in the detail of the delivery.
The VAT application and business rate rises for private schools were estimated to deliver £1.5bn in Labour’s manifesto, however today they were projected to deliver £9bn and the chancellor set about explaining where the money would go. In addition to the £2.3bn for core school budgets, £1bn has been announced for special educational needs provision and £6.7bn for capital investment in schools. Greater funding for breakfast clubs was also announced which delivers on two goals; well fed children and encouraging parents to rejoin the workforce.
An additional £22.6bn for day-to-day health spending and £3.1bn in capital spending supporting both new hospital buildings and bringing the NHS’s IT belatedly into the 20th century.
The trans-Pennine line gets money for upgrades, and there’s money for the East-West Rail project (connecting Cambridge and Oxford via Milton Keynes) too. HS2 will actually reach Euston. And there’s £650m for local transport schemes.
Funding for 11 green hydrogen plants was announced, alongside £3.6bn for the warm homes plan.
Join our deep dive into what the budget means for the sector in our post-budget webinar on Thursday 31st October, from 12:30. Please register here.
If you are interested in finding out more, particularly about housing policy, Cratus is holding the Surrey Development Conference on 5th November with Baroness Taylor, Labour’s Housing Minister in the Lords, as the keynote speaker. Please don’t hesitate to contact us for a ticket on a bill which also includes the chair and chief executive of the Planning Inspectorate, Leader of Surrey County Council, Surrey MP Will Forster and much more.