Budget 2024: Has Labour kept working people tax vow?

Chancellor Rachel Reeves delivered a barnstorming Autumn Budget 2024 pledging to restore Britain’s ‘broken finances’ without raising taxes for working people.

In her 90-minute speech, she outlined Labour’s economic plans, including taxes and investment, mainly based on measures listed in the party’s election manifesto.

Reeves told a crowded Parliament that the first Labour government in 14 years had inherited a challenging legacy of £22 billion in unfunded spending, the highest national debt in over 50 years, and stagnating living standards.

Her significant change was redefining how the government classifies debt.

The national debt was recorded as liabilities for decades—what the government owed or committed to paying.

National debt becomes an asset

Now, what is owed to the government as a balancing figure. For example, £236 billion is outstanding in student loans, which should be repaid over the coming years. Adding the loans to the UK balance sheet gives the government extra headroom to borrow.

The theory is that extra borrowing invested in the economy stimulates job creation and wealth, which gives the government revenue to reduce lending in the future.

The Chancellor argues the Budget will boost public investment by £100 billion over the next five years.

Ms Reeves says: “This Budget takes the difficult decisions on tax, spending and welfare to restore economic and fiscal stability, so that the government can invest in the country’s future and achieve its mission for growth.”

She told MPs she is committed to protecting and raising living standards for working people. She confirmed her pre-election promise not to increase National Insurance, VAT, or Income Tax on them. Thus, working people will not see higher taxes on their payslips.

No change in personal taxes

Tax rates and thresholds will remain the same until April 2028-29, when they will adjust in accordance with inflation.

However, employers will pay more National Insurance, as contributions will rise from 13.8 per cent to 15 per cent from April 2025. The current £9,100 a year earnings threshold will be reduced to £5,000. NI relief provided by the Employment Allowance will also rise from £5,000 to £10,500.

The Office for Budget Responsibility (OBR), the government's independent fact-checker, agrees that direct taxes will not change. Still, working people will likely feel the measure's impact through higher prices and lower wages.

IHT stays frozen until 2030

Other primary non-property measures announced by Ms Reeves include:

• The freeze on Inheritance Tax thresholds and rates due to end in April 2028 extends until April 2030.
• The main rate of Corporation Tax paid on business profits of more than £250,000 stays at 25 per cent until the next general election.
• Minimum wage rates rise in April 2025 from £11.44 to £12.21 an hour for over 21s and from £8.60 to £10 an hour for 18 to 20 years olds.
• A freeze on fuel duty introduced in April 2022 continues for another year.

Labour’s broken promises

In response to the Budget speech, opposition leader Rishi Sunak said: “Labour leader Sir Keir Starmer said on his first day he wanted to restore trust with actions, not words. Today, he says, the public can see the Budget contains 'broken promise after broken promise.'”

Mr Sunak said the Budget shows that Labour will tax and spend far more than promised. They have fiddled the figures.

As Reeves stood down, the Pound wobbled, falling 0.5 per cent against the US dollar to $1.295 and 0.2 per cent against more robust European economic data.