The chancellor, Rachel Reeves, presented her first Budget to Parliament today (30 October), including announcements on a change to government rules on borrowing, tax increases totalling £40bn and increased spending on investment, health and education.
Reeves was the first ever female chancellor to present a budget. This is also Labour’s first budget since Alistair Darling’s statement in March 2010.
The 2024 version includes a raise in the legal minimum wage for over-21s of over 6% and fresh commitments on housing.
National Insurance and business rates
The government has said it will increase employer national insurance contributions (NICs) by 1.2%, from the current rate of 13.8% to 15%.
Firms will also now only pay NICs on workers’ earnings over £5,000, a change from the previous threshold of £9,100. This change will enter force in April.
The rise in NICs for employers comes following criticism of the measure as it was trailed, including from Federation for Small Businesses executive director Craig Beaumont, who said SMEs would be “rightfully outraged” by the change.
However, Reeves argued in announcing the change that she was shielding employees by not extending the freeze on employee NIC thresholds:
“Having considered this issue closely, I have come to the conclusion that extending the threshold freeze would hurt working people would take more money out of their pay slips. There will be no extension of the freeze in income tax and national insurance thresholds beyond the decisions by the previous government.
“From 2028-29, personal tax thresholds will be uprated in line with inflation once again.”
There was positive news for businesses in the retail, hospitality and leisure industries, meanwhile, for whom Reeves announced a 40% relief on business rates in 2025/26, up to a cap of £110,000 for each business.
This was mitigated by the expiry of a 75% business rate discount on retail properties – which Reeves argued was a “cliff-edge” created by the previous government – which will now only be applied at a 40% rate.
Investment and fiscal rules
The government’s change to its fiscal rules to allow the borrowing of up to £50bn a year for investment was confirmed by the chancellor, who said that said it would “free up our institutions to invest as in Germany, France and Japan”.
Applying from the 2029-2030 fiscal year, the chancellor’s change will, she added, “ensure capital spending is good value for money”.
The changes to the government’s fiscal rules include a ‘stability rule’, which will require the government to “move the current budget into balance, so day-to-day spending is met by revenues” and ensuring that the government “will only borrow for investment”.
The ‘investment rule’, meanwhile, will target a reduction of “net financial debt (public sector net financial liabilities) as a proportion of GDP”.
In its full Budget document, the government says:
“This [investment] rule keeps debt on a sustainable path while allowing the step change needed in investment, by capturing not just the debt that government owes, but also financial assets that are expected to generate future returns.”
Freeports
The government confirmed also that it is providing “funding for Investment Zones and Freeports across the UK”, as well as approval for the East Midlands Investment Zone “to support advanced manufacturing and green industries”.
It also confirmed that five new customs sites will be “designated in existing Freeports shortly”. On freeports, the government also said:
“The government will also work to ensure the Freeports policy model aligns with the national Industrial Strategy.”
SMEs
For SMEs, the government has set out plans for a new ‘SME Digital Adoption Taskforce’, which aims to produce a report on digitisation efforts by small businesses by 2025.
This will be supported by £4m in funding for a pilot package from the Department for Business and Trade (DBT) to “encourage tech adoption for SMEs”, while there will also be £8m in additional funding for the Made Smarter Adoption programme, which supports “more small manufacturing businesses to adopt advanced digital technologies”.
More broadly, the government pledged to present a Small Business Strategy Command Paper next year.
“This will set out the government’s vision for supporting small businesses, from boosting scale-ups to growing the cooperative economy, across key policy areas such as creating thriving high streets, making it easier to access finance, opening up overseas and domestic markets, building business capabilities, and providing a strong business environment.
“The paper will complement the government’s forthcoming Industrial Strategy and Trade Strategy.”
Fuel duty, CBAM and Plastic Packaging Tax
Reeves also confirmed that the 5p cut in fuel duty on petrol and diesel, previously introduced by the previous Conservative administration and due to end in April 2025, will be kept for another year.
Elsewhere, the government confirmed in the full Budget document that there will be an increase in the Plastic Packaging Tax rate for 2025-26 in line with CPI inflation. It says this will “incentivise businesses to use recycled instead of new plastic in packaging”.
It also published its response to the public consultation on the policy design of the UK’s new Carbon Border Adjustment Mechanism, which it says will be introduced on 1 January 2027.
More insight to come
As ever, it will take time for the dust to fully settle on today’s Budget response and experts from the Chartered Institute will be sharing more key takeaways from it over the coming days.
Please do get in touch with us to share your thoughts about how the Budget will affect you and your business, at editor@export.org.uk.