Chancellor Rachel Reeves gave the first Autumn Budget from a Labour Government in 14 years, stating her intention to ‘restore economic stability’ through increased investment and taxation
Almost all of the Autumn Budget’s key details have been announced in the press prior to the speech, with no big surprises, after weeks of carefully managed expectations in the press.
In an overnight statement, the Treasury said that “[Reeves] will make clear that this budget rejects austerity, instead prioritising economic stability, investment and reform. The budget will ensure funding to cut hospital waiting lists, unlock affordable homes and new investment to rebuild schools.”
The Chancellor maintained the Labour Government’s policy of rebuilding the economy after nearly 15 years of Conservative rule, firmly stating that: “the only way to drive economic growth is to invest, invest, invest. There are no shortcuts. To deliver that investment we must restore economic stability.”
Highlights for the construction industry from the Autumn Budget include:
- Ensuring the delivery of the trans-Pennine upgrade connecting York, Leeds, Huddersfield and Manchester, as well as improving rail services between Oxford, Milton Keynes and Cambridge
- Ensuring that HS2 will go to Euston station
- ‘Over’ £5bn for for affordable housing
- £3.4bn in funding for the warm homes plan
- Funding 11 new green hydrogen projects
- An extra £300m for school maintenance, raising overall funding for £2.1bn, and tackling the issues posed by RAAC
- Reducing right-to-buy discount, with local governments retaining the earnings from council housing sales to reinvest
- Tackling the planning backlog with “hundreds of new planning officers”
Other announcements include:
- Raising taxes by £40bn overall
- Maintaining the Bank of England’s inflation target of 2%
- Raising the minimum wage by 6.7% to £12.21
- Increasing employers’ national insurance to 15% from April 2025 and lowering the payment threshold from £9,100 per year to £5,000, raising £25bn by the end of the forecast period
- A £2.9bn increase in defence spending
- Capital gains tax increasing(from 10% to 18% at the lower threshold, and the higher rate increasing from 20% to 24%)
- An extra £1.3bn for councils, with at least £600m specifically for social care and £230m to tackle homelessness and rough sleeping
- Continuing the fuel duty freeze, as well as the 5p cut introduced to alleviate cost of living pressures that was due to end in March
- Hiring an extra 5,000 compliance officers to increase tax revenues
- The freeze in income tax and national insurance thresholds introduced by the previous government will not be extended
- Changing the debt rule to unlock greater debt headroom
- Increasing infrastructure investment
- Increasing the NHS budget- with £1bn for repairs and upgrades and £1.5bn for new beds in hospitals and testing capacity
Introducing a new debt rule- the ‘investment rule’
The Chancellor’s changes to the definition of debt will allow the Treasure to borrow greater amounts for long-term capital investment, which she confirmed at the International Monetary Fund’s annual meeting last week would be spent on infrastructure investment.
Four “guardrails” would be used to prevent excessive debt, including greater transparency of capital spending and setting capital budgets every five years.
Reeves stated that this decision would unlock up to £15.7bn in additional headroom. This is markedly lower than the £50bn figure reported by several outlets prior to the Autumn Budget.
Former prime minister Rishi Sunak described the Autumn Budget as a betrayal of Labour’s pre-election promises to not raise taxes.
The Office for Budget Responsibility described the Budget as delivering a “large, sustained increase in spending, taxation, and borrowing.” Their assessment of the announcements were uncertain on how it would impact rising inflation, as well as the changes made to pay rippling out across employment figures.
Industry reactions were muted, with concerns that UK construction is being left behind
Clive Docwra, managing director of McBains, described the Autumn Budget as a “mixed bag”. Tom Allen, MD at Signature London went further: “For the first Labour budget in 14 years, we see nothing but hot air for the construction industry.
“First construction’s omission in Labour’s new industrial strategy and now a series of measures that either ignore construction entirely or potentially suffocate firms already treading water in our sector. How can we get Britain building again without the construction industry?”
Some smaller businesses are concerned about meeting the new minimum wage requirements
Paul Nowak, the TUC general secretary, welcomed the Autumn Budget’s minimum wage increase,saying: “This increase will make a real difference to the lowest paid in this country at a time when rents, bills and mortgages are high.
“The independent Low Pay Commission has looked at a range of economic evidence before making this recommendation. They know employers can absorb this increase.”
Increased wages could draw more workers to the UK construction industry, which is facing a historic skills shortage.
However, some industries which employ a large number of minimum wage workers, such as the hospitality sector, have already voiced concerns about the change. Kate Shoesmith, deputy chief executive of the Recruitment and Employment Confederation, said: “Businesses have set out to us and the government their concerns over their ability to continue to operate if there are further substantial increases to their cost base in the short-term – and very little on the horizon that points towards growth.”
Clive Dowcra echoed this sentiment, adding: “On the flip side, a number of our clients and industry colleagues say the increase in employers’ NIC contributions has the potential for a negative impact on wages and job creation at a time when skills shortages mean employers need to be paying competitive wages to attract entrants into the industry.”
“More is needed” to achieve 1.5m new homes by 2029
Melanie Leech, chief executive, British Property Federation, commented, “With no concessions on the overall business rates burden today’s announcements on this are just robbing Peter to pay Paul. However, the Chancellor has at least recognised the business rates system is broken and has signposted the direction towards a reformed system.
“Measures to support the delivery of more homes are welcome but the chancellor knows that much more is needed if the Government is to deliver on its 1.5m homes pledge. The promised housing strategy needs to be much bolder and go much further. This includes unlocking the billions of pounds of investment into the build-to-rent sector, so it is particularly disappointing that Rachel Reeves did not take the opportunity to reverse the previous Government’s decision to abolish multiple dwellings relief announced in Spring.”
Not enough on energy
Clive Dowca added that he would have also liked to have “seen an extension on the zero rate of VAT on installations of energy savings materials and would have also welcomed more energy-saving technologies and materials being brought into the scope of the relief to give an impetus to retrofitting.”
