The Autumn Budget 2024- The Good, The Bad and The Ugly?

By Joshua Lloyd

On the 30th October 2024, the Chancellor of the Exchequer Rachel Reeves announced her vision for the economy with her edition of the yearly Autumn budget- the first for the Labour Party in 14 years. From the offset, Reeves made it clear that this is not a celebratory lap of a budget with a sole ambition to create flashy projects and to wave a magic wand. This can be seen from the beginning of the Autumn budget 2024 document, with Reeves quoted as saying the budget is “to fix the foundations of the economy and deliver change”. Fixing the foundations of the economy is certainly a noble conquest for anyone to frame their policy around, yet it is the measures she has pursued which bring into question whether or not this goal will be achieved. Whether the measures laid out can lead to a more prosperous Britain for the future is another question. 

The headline changes were the increases in certain taxes totalling an increase of £40 billion. Chief amongst them, the Budget announced a 1.2p increase in employers’ national insurance contribution to 15p, alongside reducing the earning thresholds at which the tax takes effect. This increase is set to raise £25 billion a year. The decision has received backlash from businesses across industries, however I believe it may be a useful measure. The labour productivity of Britain has long lagged behind economies it aspires towards, currently being 18% lower than the United States. With this productivity gap, employers will have more incentive to upskill their workers with the increase in the contribution and to discourage the underemployment of their workforce with the decreased threshold. The decrease in wasted labour productivity can significantly reduce the burden, with an increase in productivity allowing for higher profits and less waste for businesses.The Office of Budget Responsibility were more cynical, stating that £9.7 billion could be offset through changing business practices, suggesting the approaches of businesses cutting salaries or reducing staff hours.

Another area of changing tax law that came under scrutiny was the changing of business relief. The change in this is that from April 2026, inherited agricultural assets worth more than £1 million will be taxed at a 20% inheritance rate. Protests have erupted over this, with thousands of farmers making the trip to Westminster on the 19th of November. Thought is heavily divided on this issue. The Labour party and those supporting the changes argue that it is much needed reform. The top 1% own almost a quarter of all wealth in Britain and farmland is another aspect in which this has been taken advantage of. Billionaire inventor and owner of Dyson, Sir James Dyson, owns £612 million in net assets via his farming business Dyson farming and an estimated 36 thousand acres across Lincolnshire, Oxfordshire, Gloucestershire and Somerset. With an estimated net worth of £20 billion, I would argue the 20% rate on the farm land presents simply a fair contribution to the British treasury. 

From the farmers perspective, the new change simply squeezes an already struggling generational business. The majority of farmers argue that farming as a business is one of being asset rich through land and livestock, yet cash poor due to tight margins and constantly rising costs of production. Since 2019, farming costs have risen significantly. According to the BBC, pig farming costs have risen by 54%, cattle has risen by 44% and cereal prices by 43%. These rising costs have not coincided with price rises reducing farming profitability, all whilst the plethora of EU subsidies have not been continued by the British government since Brexit. It is the traditional farming families that are most likely to be negatively affected. Buyers from non-farming backgrounds, such as the aforementioned Sir Dyson, have resulted in land value rising significantly, whilst farming as a livelihood has fallen dramatically year on year in profitability. A solution to this could perhaps be a more targeted approach to the tax, perhaps by only taxing over a certain threshold of which the farm can not have to sell off valuable agricultural assets to afford it. It can also be argued that the outrage has been enhanced for lobbying purposes in Westminster. Official farm business statistics state that only 34% of farms are worth less than £1 million, yet this is misleading, as the majority of farmers looking to pass on farms are married, which on top of personal allowances gives the tax free threshold up to nearly £3 million- far more generous than any other group in the United Kingdom.

Schooling and education was another area of focus for Reeves, with a 19% real-term increase in investment. Constituents of this include £6.7 billion of capital investment into the Department of Education with £1.4 billion sidelined to rebuild the schools in the worst states. The increase in spending is in line with traditional Labour policies echoing Tony Blair’s “education, education, education” platform of 2001. With BBC headlines such as “Crumbling schools plagued by leaks and cold” in January 2024, this is much needed spending on the future of children in Britain. Another area regarding schooling that divided opinion was the 20% VAT rate being applied to private school fees. Smaller, specialist private schools are likely to be the worst affected with pupils turning down places, whilst big public school institutions are more likely to not face many issues when passing on the 20% rate to consumers. There is worry that, with the rising fees, a number of pupils may be pushed into the state sector for schooling, increasing pressure on already struggling schools. Labour themselves have predicted 35 thousand students will leave to join British state schools, with a further 2 thousand leaving to join schools abroad or in their home countries if international. Labour has also stated that the money raised should amount to training 6500 new teachers for state education. It is likely that areas will be affected very differently. Places like Surrey in which income is high has a strong foundation of private education, with relatively fewer state school places on offer, it is likely that it will be affected worse. Big schools are also large employers for certain areas, which if the VAT causes numbers to drop heavily, may create issues in unemployment.

Other changes that have been made is a £22.6 billion increase in the day-to-day health budget in the hopes of finally reducing NHS waiting times. Alongside this, Labour have made more of a commitment to affordable housing with £5 billion of housing investment being spent for 2025-26. Pensions have also risen by 4.1% with the triple lock on pensions being confirmed for the coming year. In monetary terms this equates to an increase of £470.60 a year on full state pensions.

Rachel Reeves has set out a bold outline of the economy she wants going forward with her role of Chancellor of the Exchequer. The talk of the £22 billion “black hole” inherited from the Conservative government has given legitimacy to the tax rises, particularly with national insurance. The tax rises should help to address this, yet there are questions as to whether the spending goes far enough to address the struggling state Britain finds itself in. Living standards have declined at the highest rate of any G7 country and the average person is still feeling the effect of the pandemic and in some cases, the effect of the 2008 financial crisis. The hope is that this budget should give the government the room needed to be more ambitious in subsequent years once the “black hole” is addressed- only time will tell. Public opinion has been mixed but not unexpected to the budget. Certain sectors have had significantly negative reactions, in particular, the large businesses who employ low-earning workers and the implication of the national insurance change, and farmers who have been hit with IHT changes. On the flip side, increases in the minimum wage and pensions, as well as the huge investment promises for the NHS and schooling have been celebrated. In my opinion, for the long term optimist, this talk of investment could well begin much needed changes into restoring public services and infrastructure that have long been neglected under years of austerity. It is now the job of the Labour government to not let that optimism go in vain.