Rachel Reeves delivers Labour’s first budget since 2010: here’s what you need to know

Article written by: Tim Mooney

Labour’s Autumn budget was delivered to a raucous room, outlining £40bn in tax increases and far-reaching investment to drive net zero forward. 

The budget was delivered by Chancellor Rachel Reeves. This marks the first budget delivered by a Labour government since 2010, and the first ever budget delivered by a female Chancellor. In spite of these winds of change, the Chancellor’s initial address was expectedly contentious, taking aim at the former Government’s legacy.  

A budget black hole  

Reeves begins by outlining tough choices that have had to be made. 
 
“This budget raises taxes by £40bn; any Chancellor standing here today would have to make this decision… Our budget focusses on stability and restoring our public services… The only way to drive economic growth is to invest, invest, invest.” 
 
The Chancellor outlined seven growth targets detailed in the Budget:  

• To restore economic stability. 
• To increase investments and build new infrastructure – highlighting £70bn of investment through the National Wealth Fund and transforming planning rules to “get Britain building.”  
• Ensure all parts of the UK can realise their potential – working with devolved governments.  
• Focus on prospects and skills – Skills England and investment in education and skills. 
  Outline long term modern industrial strategy and expanding opportunities for SMEs.  
• Drive innovation with record funding for R&D to harness UK’s science and technology potential.  
• Maximise benefits of our clean energy mission – key investments in carbon capture and storage (CCS) and renewables.  

What can businesses expect?  

Some of the tax changes implicating businesses include:  

• National insurance will not increase for working people, nor will VAT and income tax.  
• National Insurance (NI) to rise to 15 per cent for employers (an increase of 1.2 per cent). 
• Employment allowance to increase from £5,000 to £10,500. “This means 865,000 employers won’t pay any NI next year.”  
• The threshold where  employers start paying NI on each employee's salary is to fall from £9,100 per year, to £5,000 per year, expected to raise £25bn per year by the end of the forecast period.  

During her budget, Reeves confidently asserted “we are asking businesses to contribute more.” This was followed by her plans to ensure this occurs.  
 
Firstly, Reeves outlined a 40 per cent relief on business rates for retail, hospitality and leisure industries, those most heavily impacted by the pandemic, energy crisis, and cost-of-living consumer habits. Following this, Reeves announced she will be cutting duty on draft alcohol, which was met with raucously loud cheers from MPs. 
 
Fuel duty was supposed to rise by RPI next year, equalling a rise of 7p per litre. Instead, Reeves will freeze fuel duty at 5p per litre for next year and the year after. “There will be no higher taxes at the petrol pumps next year.” 

The budget’s green commitments  

As for the Labour Government’s environmental plans, Reeves announced her ambition to make “Britain a clean energy superpower.”  
 
This plan involves funding for 11 green hydrogen projects in the UK, a Warm Homes plan detailing £3.4bn of investment over the next three years to transform over 350,000 homes – including social housing - with energy efficiency measures, the establishment of GB Energy, a new, publicly-owned energy company that will be responsible for driving the deployment of clean energy in the UK, and £2bn investment for the automotive sector with a special focus on the EV industry, encouraging further uptake.  
 
The Government is also developing plans to promote public transport, freezing bus ticket pricing and punishing high-income, emissions heavy forms of transport. Reeves announced £650m for local transport funding, £500m to improve road maintenance, and upgrades at Bradford station, improved capacity at Manchester Victoria, and electrification of the Wigan-Bolton line.  
 
As part of these plans, the Government is placing greater emphasis on devolution, increasing funding for Combined Authorities with Greater Manchester and West Midlands to be the first mayoral authorities to receive integrated settlements for next year.