INTRODUCTION

Boxed in by Labour’s manifesto pledges not to increase income tax, employee’s national insurance and VAT, Chancellor Rachel Reeves instead had to raid other taxes, like capital gains tax (CGT), inheritance tax (IHT), employer’s national insurance and to extend the tax threshold freeze to find the £40bn needed to balance the books.

While the tax rises came thick and fast, the Chancellor announced there would no longer be biannual fiscal events. The Budget will now only be in the autumn, while the Spring Statement will have no tax changes.

Reeves said the tax-and-spend Budget was necessary to reverse the dire state of the public finances the Government inherited and to “fix the foundations to deliver change”.

“This Government was given a mandate to restore stability to our economy and to begin a decade of national renewal, to fix the foundations and deliver change through responsible leadership in the national interest. That is our task. And I know that we can achieve it,” said Reeves at the start of her Budget statement.

PUBLIC SERVICES ‘ON THEIR KNEES’

Starting her speech with the economy, Reeves said the Government had “inherited a black hole in the public finances” and that public services were “on their knees”.

She went on to say that the previous Government did not share some information with the OBR ahead of the Spring Budget, and had they known, their forecast for spending would have been “materially different.”

Furthermore, she said the previous Government had “no detailed plans for departmental spending set out beyond this year, and their plans relied on a baseline for spending this year”, which did not consider the much-discussed £22bn black hole.

Alongside the Budget, the Office for Budget Responsibility (OBR) also published a report on the £22bn fiscal hole handed to the Labour Chancellor.

As for the economic outlook, Reeves predicts real GDP growth of 1.1% in 2024, 2.0% in 2025, 1.8% in 2026, 1.5% in 2027, 1.5% in 2028, and 1.6% in 2029.

CPI inflation will average 2.5% this year, 2.6% in 2025, 2.3% in 2026, 2.1% in 2027, 2.1% in 2028, and 2.0% in 2029.

Quoting the OBR, she said: “This budget will permanently increase the supply capacity of the economy, boosting long- term growth.”

WILL THE PLAN WORK?

Announced the day before Halloween, the Autumn Budget was expected to spook businesses with the rumours circulating weeks before the big day about tax rises and a hike to employer’s national insurance.

For businesses, it was a Budget full of tricks rather than treats. Rachel Reeves is banking that the substantial Budget will be enough to revive the economy, and the public finances will be in a different state in a year.

While the Halloween Budget may have been scary for some, the saving grace is that there won’t be another Budget with tax changes until next autumn. Reeves hopes this will give businesses a sense of stability so that when she delivers the Budget next year, she can do it on her terms. However, time will tell if the short-term pain will be worth the long-term growth.

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