Public borrowing this year has exceeded expectations by £4.7 billion, intensifying the challenges faced by Chancellor Rachel Reeves as she prepares for the Autumn Budget.
Before the latest gloomy forecast from the Office for Budget Responsibility (OBR), a Treasury spending review had already exposed £22 billion in unfunded commitments inherited from the previous government.
The Chancellor has indicated that substantial revisions to tax and spending plans will be unveiled at the Budget on 30 October. This article explores what Ms Reeves has disclosed so far and the implications for taxpayers.
Strengthening the Foundations
Chancellor Reeves revealed that she has inherited a ‘£22 billion hole’ in the public finances and stressed the ‘urgent work’ needed to ease financial pressures by £5.5 billion this year and over £8 billion next year.
Ms Reeves announced plans to cut winter fuel payments for those not receiving pension credits and to eliminate funding for specific infrastructure projects.
The Chancellor emphasised the importance of respecting taxpayers’ money by ensuring that every pound is wisely spent, stating that the Budget will be used to ‘fix the foundations of our economy.’
She added: ‘This is not the statement I wanted to give today, and these are not the decisions I wanted to make. But they are the right decisions in difficult circumstances.’
Immediate Cost-Saving Measures
The Chancellor introduced several immediate cost-saving measures, including:
– £800 million this year and £1.4 billion next year from the cancellation of the Rwanda migration partnership and the retrospection of the Illegal Migration Act.
– £70 million this year by discontinuing the Investment Opportunity Fund and other smaller projects.
– £185 million next year from halting the Advanced British Standard.
– £785 million next year by cancelling unaffordable road and railway projects.
Additionally, a review of the New Hospital Programme was announced.
Delivering on Manifesto Promises
Ms Reeves also outlined the next steps in fulfilling Labour’s election manifesto tax commitments.
This includes ending VAT tax breaks for private schools from 1 January 2025, which will fund the recruitment of 6,500 new teachers. The non-domicile regime will be replaced with a new, internationally competitive residence-based system.
The Chancellor confirmed the extension of the Energy Profits Levy to 31 March 2030, with tightened investment allowances and an increased levy rate of 38% from 1 November 2024.
Future Tax and Spending Announcements
The Chancellor is set to make further tax and spending announcements at the upcoming Autumn Budget.
Ms Reeves reaffirmed Labour’s manifesto commitment not to raise National Insurance, the basic, higher, or additional rates of income tax, or VAT.
The Exchequer Secretary will provide further details on closing tax loopholes and cracking down on tax avoidance to ensure these funds are recovered swiftly.
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