Rachel Reeves is putting the final touches on her first budget tonight – and the stakes couldn’t be higher.
A new government, a new chancellor – which perhaps doesn’t feel very new anymore – setting out where they will take the country’s tax and spend for not just the next year, but potentially the next ten.
As one person told me last week, we’re still in the movie trailers stage of this government – the film hasn’t really yet begun.
All that’s about to change, and for Keir Starmer and Rachel Reeves they know everything will be riding on this moment.
Which is perhaps why we’ve had so much of this budget get briefed out, leaked out, or not denied, in advance.
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It’s usual for governments of all colours to kite-fly their policies and road test how they will land ahead of time.
And in recent years we have become used to having a string of announcements in the days leading up to the big day itself.
But this year feels like even more so than ever before, as the government try to keep Labour MPs, business leaders, and as much as possible, the public, on side.
So what should we expect from Rachel Reeves’ first big bang moment? Here’s what we’re expecting tomorrow.
CONFIRMED: £2 bus fare cap becomes £3 bus fare cap
Keir Starmer took the unusual move of confirming a Budget leak just 48 hours BEFORE the fiscal statement, followed up with an official Department for Transport Press Office.
The government knows ditching this policy won’t be popular, but are determined not to leave a cliff edge, so the compromise is a rise in the cap, but likely to be lifted the year after next.
CONFIRMED: New funding to kickstart delivery of two million extra NHS appointments
Extra cash for the NHS will include £1.8billion to drive down waiting lists, with more weekend and evening appointments.
Wes Streeting will be pleased to get £1.5billion for investment in infrastructure and scanners – but the devil will be in the detail of how much extra he’ll be able to wangle for the reform he says is so desperately needed.
CONFIRMED: Increase to National Living Wage
The huge to the National Living Wage on record will be good news for workers – rising by 6.7 per cent from next year.
But it’ll be another worry for businesses of how they might pay for the hike to £12.21 an hour from April 2025 for three million workers.
CONFIRMED: Rachel Reeves to rip up fiscal rules to borrow more
An investment rule will replace a debt rule, the Chancellor confirmed at the IMF last week (which got her another ticking off from the Speaker).
Ripping up the fiscal rules will allow her to borrow billions more to invest, but has already spooked the markets and seen gilts spike.
She’ll have to be careful to lay out her exact plans, and not to borrow more than what economists reckon is healthy, if she’s going to make this work.
CONFIRMED: £240 million Get Britain Working package
Ministers will roll out trailblazer teams in local areas with support in skills and education in a fresh back to work drive. There will be a white paper in the coming months with more for how to stop the welfare bill from ballooning any further.
That will also see an extra 800,000 people moving early from Universal Credit this autumn – rather than in 2028 – which will also save money for the Treasury, but cause a lot of angry Brits on benefits to lose cash.
CONFIRMED: £1.4bn for crumbling schools
Tripling investment in breakfast clubs to £30million, with another £1.8billion to expand childcare hours.
And they will stick to government plans to rebuild 50 schools – another sign of the government wanting to prioritise public services.
CONFIRMED: £500m boost to the Affordable Homes Programme
Right to buy discounts will be reduced in a bid to keep social housing stock, and there will be a five year cap on rents to help stabilise the sector.
More cash for building affordable homes and expanding existing schemes will please Labour MPs.
I’d expect Reeves to announce more on housing for a true voter-friendly rabbit, however.
EXPECTED: National Insurance hike for employers
Reeves and Starmer failed to dampen or deny this speculation – but they run the risk of being accused of breaking their manifesto vows.
It’s a bend at the very least if they hike it by one or two percentage points as expected.
Employers may also pay more NI on pensions contributions too.
EXPECTED: VAT on private schools – with exemptions for military kids
The Chancellor needs this cash for breakfast clubs and to fund other measures, so there’s no sign of a u-turn here despite the class war rage from the Tories.
There will likely be exemptions to soften the blow – such as for the kids of those serving in the military, and for kids with SEN programmes.
EXPECTED: Income tax threshold freeze for another year
Despite being a Tory policy which Reeves slated, it’s highly likely she’ll be unable to resist extending this for another year to raise billions to fill that black hole.
However, she’ll be unable to distance herself from that when she does – risking big political capital of dragging millions of teachers and nurses into higher tax brackets.
They did warn us of difficult decisions.
EXPECTED: Nom Dom tax loopholes closed
After reports that the non-dom tax loophole crackdown could actually cost the Treasury money, insiders insisted they were looking at how to make it work.
It’s been surprisingly quiet in the following few weeks, leading to speculation it may be dropped entirely.
It feels unlikely, given Reeves referred to it in her conference speech, it was a manifesto promise, and works nicely to unite the left of the party.
But, show us the money, Chancellor…
EXPECTED: HS2 confirmed to go to Euston
If the government wants to show they’re keen to grow the economy, confirming HS2 will go to Euston would be a good place to start.
However, the project is so tainted by the last government, it’s unclear what it’s future will be.
Slapping a new name on it and announcing more links north would be a good place for Reeves to start.
Chancellor reveals Budget will deliver 40,000 extra hospital appointments each week
EXPECTED: Capital gains and inheritance tax hikes
Starmer has said he wants those earning more to bear a bigger burden of tax – and here’s where it will fall.
Though it won’t see your average worker effected too much, the Chancellor will be hoping it doesn’t dent her tax receipts elsewhere.
EXPECTED: Sneaky stealth taxes of alcohol, cigarettes and vape duties up
Slapping a few per cent increase in duties on everything from flights to booze will be a tax on working people by the back door.
These will be buried in the small print of the budget documents, and ones to keep an out for tomorrow.
This is where the budget is expected to really sting. Reeves will be looking as well for new taxes to shoulder the burden.
£240m in Budget for local services to help people back into work, Starmer says
EXPECTED: Fuel duty cut ends
Britain’s army of drivers were overjoyed with Rishi Sunak’s 5p cut to fuel duty – and it’s been kept in place since.
The PM promised to “listen” to concerns amid reports there could be a huge hike to plug the black hole.
A middle way of ending the cut but not putting it up further feels likely.
EXPECTED: Cuts to unprotected departments
The Chancellor’s long warned of tricky decisions on spending – we know this means cuts to departments in real terms.
Already Cabinet ministers have been grumbling about where the axe is falling – with the Housing department, Ministry of Justice and others on the chopping block.
This will be politically risky for the Chancellor who has promised no return to austerity.
She’ll have to badge it up properly as cutting waste and making Whitehall more efficient if she’s going to keep her Labour backbenchers on side.
EXPECTED: Investment opportunities
Hot off the back of the investment summit, all eyes will be on how the government is going to spend the billions they’ll borrow for investment, and how they will pursude firms to follow suit too.
Reeves has long promised innovative measures like the super deductor – will she extend that or launch a new sweetener to help boost the economy.
The PM promised to make Britain the fastest growing economy in the G7, it’s time they finally started talking about how that will happen.
EXPECTED: Business rates updates
A huge 75 per cent Covid discount is due to be wound down in the coming months, and firms are worried about a cliff edge.
Reeves told MPs today she’d be giving them a Budget update today.
Covid’s long gone, but firms are struggling – she’ll have to balance their interests carefully to make sure she doesn’t harm the economy while raking in extra reserves for the nation’s piggy bank.
