Rachel Reeves says the UK voted for change, and the Labour government has a mandate for a decade of “national renewal”.
Reeves pledges “more pounds in people’s pockets” and improved living standards. The only way to drive economic growth is to “invest, invest, invest”, she adds.
The government must “restore economic stability and turn the page on 14 years” of Conservative government, Reeves says. She says the Labour party has rebuilt the UK economy before, and will “rebuild Britain once again”.
Reeves says this budget will raise taxes by £40bn.
She adds that she is “deeply proud to be Britain’s first ever female chancellor of the exchequer’.
Peter Walker, senior political correspondent: Reeves sets out the political challenge – and the very big one – at the centre of her budget, and indeed the whole government: making people feel they are better off, and with better public services. And this requires investment, she says, adding some inevitable Tory-bashing for good measure, plus noting her status as the first-ever female chancellor.
OBR
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Reeves says Labour inherited a £22bn “black hole” with allegedly unfunded pledges by the Conservative government.
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The Office for Budget Responsibility (OBR), the government’s budget watchdog, has published a review saying that the previous government did not disclose details of spending. Those details would have made forecasts “materially different”, Reeves says.
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Reeves says the government will implement 10 recommendations from the OBR’s review.
PW: This is very nakedly partisan and in some ways familiar, not least the idea of the £22bn fiscal black hole. But the idea of the OBR saying it was effectively misled by the Conservatives is very strong political cover for the coming tax rises in limited increases to public budgets. It will enrage Jeremy Hunt, the shadow chancellor, all the more.
Compensation schemes
Reeves says the government will compensate victims of the infected blood scandal with £11.8bn, and there will be another £1.8bn for victims of the Post Office Horizon IT scandal.
PW: Even Tory MPs will find it hard to argue with this. And Reeves’s words that the last government apologised for the infected blood scandal but failed to budget at all for compensation payments is a powerful argument.
Inflation and growth forecasts
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The chancellor will maintain the Bank of England’s 2% target for inflation.
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Inflation will average 2.5% in 2024, rising to 2.6% in 2025, before gradually dropping to 2% in 2029, according to OBR forecasts. Inflation was at 1.7% in September, below the Bank of England’s 2% target, and down from 11% in October 2022.
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The OBR slightly upgrades its growth forecast for this year, but adjusts them down in later years. GDP growth is forecast to be 1.1% in 2024, then 2%, 1.8%, 1.5%, 1.5%, and 1.6% in 2030, Reeves says. At the spring budget under the then Conservative chancellor Jeremy Hunt the OBR had forecast 0.8% growth this year, 1.9% in 2025, and 2% in 2026.
PW: The OBR’s inflation and growth predictions are hardly stellar, with inflation not due to fall down to the 2% target before 2029. But in truth, as long as it stays in the 2% range, Reeves would take it. She will, however, very much hope that the growth figures – the stated central task of the Keir Starmer government – pick up.
Government borrowing
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Reeves announces new rules to not borrow for day-to-day spending. The current budget will be balanced within three years of forecasts.
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The government will run a deficit of £26.2bn in 2026, but will achieve a surplus of £10.9bn in 2027-28, £9.3bn in 2028-29 and £9.9bn in 2029-30.
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Public sector net debt will fall from £127bn in 2024-25, falling gradually to £70.6bn by 2029-20.
PW: Expect the forecasts of reduced borrowing and an eventual surplus to be much mentioned by ministers in the coming days and weeks, as they try to push back against the Conservatives’ charges of fiscal incompetence. The tougher rules on day-to-day spending will be seen as a balance to the relaxation of their equivalent on investment, as already announced.
The minimum wage
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Reeves confirms that the national living wage, the legal minimum for over-21s, will increase by 6.7% to £12.21, equivalent to £1,400 a year for an eligible full-time worker.
PW: The most recent of literally dozens of announcements to be briefed in advance of the budget. Paying people more is usually seen as a vote-winner – but ministers will also be wary of business voices warning about the impact this could have on job creation.