Budget 2024 latest news: Rachel Reeves admits tax rises will impact wage increases for workers
Chancellor Rachel Reeves has admitted that her £40bn tax-raising Budget could impact wage growth for workers.
Asked about the consequences of increasing national insurance contributions for employers she told BBC Breakfast: “I said that it will have consequences.
“It will mean that businesses will have to absorb some of this through profits and it is likely to mean that wage increases might be slightly less than they otherwise would have been.
“But, overall, the Office of Budget Responsibility forecast that household incomes will increase during this Parliament.
“That is a world away from the last Parliament, which was the worst Parliament ever for living standards.”
Ms Reeves received a welcome boost from Washington-based think-tank the IMF which is supportive of the Budget, with a spokesman welcoming the increase in investment and spending on public services as well as “sustainable” tax rises.
However, IFS director Paul Johnson warned that Ms Reeves would have to raise tax rises further in the coming years and said her spending plans were almost as implausible as her predecessor Jeremy Hunt.
Key Points
‘Mixed news’ on UK workers pay packets, think-tank says
The Resolution Foundation has said that there is “mixed news” on UK workers pay packets after Rachel Reeves Budget announcement on Wednesday.
The higher than expected minimum wage increase next April will be a big boost for those in the 18-20 age bracket, the think-tank says.
However the wider pay situation seems bleak. The think-tank added: “By 2028 real wages are expected to have grown by just £13 a week over the past two decades.”
Tax calculator: See how Rachel Reeves’ Budget will affect you
Rachel Reeves has unveiled huge tax hikes of £40bn in her Budget as Labour bids to fix the nation’s finances.
Key policies include a hike in employers’ national insurance contributions, a rise in stamp duty for second homes and a freeze on fuel duty.
Capital gains tax will also rise – to 18 per cent for the lower rate and 24 for the higher – while the chancellor also unveiled a reform of inheritance tax.
After months spent warning the public of “tough choices” ahead, Ms Reeves promised to “invest, invest, invest” in order to “fix public services”
The Independent’s Budget calculator, created by tax advisory firm Blick Rothenberg, below will help you to determine whether you are better or worse off following Wednesday’s statement.
Enter a few details such as how much you earn, whether you are single, if you are in a couple or have a family to see how your finances will be affected.
Hunt claims a Tory Budget would have taken ‘harder path’ of cutting welfare
Shadow chancellor Jeremy Hunt said a Conservative budget would have taken “the harder path” by cutting the number of people on benefits.
Questioned by presenter Kay Burley on Sky News about “crumbling public services”, he said: “That’s the central issue.
“With an ageing population, with all the pressures of what (Russian president Vladimir) Putin is doing in Ukraine, how do you fund our public services without really damaging rises in taxation?”
He added that a Tory government “would have done it differently” – pointing to the cost created by the increase in people claiming benefits since the start of the Covid-19 pandemic.
“We would have made difficult decisions on welfare reform, on the public sector, and productivity,” he said.
“If you cut the number of people claiming benefits to 2019 levels – in other words before the pandemic – that releases £34 billion a year.
“The government has chosen to do nothing on that and, as a result, the adult working-age benefit bill is going to be more than £100 billion by this end of this period.
Reeves national insurance hike ‘clearly a tax on working people’
The chancellor’s national insurance hike is “clearly a tax on working people”, an influential think tank has said.
Mike Brewer, interim boss of the Resolution Foundation, said Rachel Reeves’ decision to increase employer national insurance contributions “will eventually feed through to lower wages”.
“This will definitely show up in wages, this is definitely a tax on working people, let’s be very clear about that,” Mr Brewer said.
How did the papers react to the Budget?
The front pages this morning split broadly along party lines. The Labour-friendly Daily Mirror focused on Rachel Reeves £70bn boost to public services to help “undo 14 years of Tory neglect”.
The left-of-centre Guardian hailed “the return of tax and spend” and said Ms Reeves “had gambled” that voters would reward Labour for fixing public services.
The Daily Mail, Financial Times, Times and Metro all focused on the £40bn tax rise announced by Ms Reeves on Wednesday.
Tory-friendly Daily Express described the Budget as a “halloween horror show” and The Daily Telegraph said it was a “nightmare on Downing Street”.
The Sun highlighted Ms Reeves tax rises and highlighted her decision to freeze fuel duty – a regular focus for the Murdoch-owned paper.
Hunt claims Budget ‘a very sad day for ordinary families’
Shadow chancellor Jeremy Hunt said Wednesday was “a very sad day for ordinary families” and claimed Labour has broken its manifesto pledge not to raise taxes for working people.
He told Sky News: “Yesterday was a bad day for trust in British politics because 30 times this year before the election the Chancellor said she had no plans to increase tax outside what was explicitly written in the manifesto – and we had the biggest tax-raising Budget in British history.
“However much Labour tries to say that their tax rises won’t hurt ordinary families, the OBR and the Institute for Fiscal Studies say it’s going to mean lower pay, lower living standards, higher inflation, higher mortgages – so it is a very sad day for ordinary families.”
Catastrophic cost of Brexit on UK trade revealed in stark OBR warning
Brexit is on course to cut UK trade by 15 per cent, the government’s independent financial watchdog has warned.
Vote Leave campaigners argued that British trade would receive a boost from exiting the European Union in the run up to 2016’s referendum.
But in documents published alongside Rachel Reeves’ Budget the Office for Budget Responsibility (OBR) said that “weak growth in imports and exports over the medium term partly reflect the continuing impact of Brexit, which we expect to reduce the overall trade intensity of the UK economy by 15 per cent in the long term.”
The figures led to claims that Brexit was the “elephant in the chancellor’s study”.
IMF endorses Reeves tax rises and focus on investment
The International Monetary Fund (IMF) endorsed the investment and spending on public services in the chancellor’s Budget, as well as sustainable tax rises.
In an unusual move, the Washington-based watchdog said: “We support the envisaged reduction in the deficit over the medium term, including by sustainably raising revenue.”
Reeves admits tax rises will impact wage increases for workers
Businesses will have to absorb the costs of paying more national insurance and this may result in smaller pay rises, Rachel Reeves has acknowledged.
Asked about the consequences of increasing national insurance contributions for employers by 1.2 percentage points to 15% from April 2025, the Chancellor told BBC Breakfast: “I said that it will have consequences.
“It will mean that businesses will have to absorb some of this through profits and it is likely to mean that wage increases might be slightly less than they otherwise would have been.
“But, overall, the Office of Budget Responsibility forecast that household incomes will increase during this Parliament.
“That is a world away from the last Parliament, which was the worst Parliament ever for living standards.”
