Chancellor Rachel Reeves set out significant investment plans to “rebuild Britain once again” in a Budget that kept manifesto commitments but increased taxes for business and entrepreneurs.
The first female Chancellor acknowledged her Budget “raises taxes by £40bn” to fund a significant uplift in day-to-day funding for the NHS, investments in schools and transport, and to plug the £22bn black hole.
“The only way to drive economic growth is to invest, invest, invest,” said Reeves. “There are no shortcuts and to deliver that investment, we must restore economic stability and turn the page on the last 14 years.”
The Labour Chancellor laid out wide-ranging fiscal plans in a 77-minute speech against a backdrop of the most raucous House for a Budget speech for several years.
Reeves said: “The choices I have made today are the right choices to restore stability for our public finances, protect working people, to fix our NHS and to rebuild Britain. That doesn’t mean these choices are easy, but they are responsible.”
She set out a long list of priorities that the Budget is designed to tackle – restore economic stability, increase investment and build new infrastructure, work with devolved nations and regions to develop local growth plans, improve employment prospects and skills, launch the Government’s industrial strategy, drive innovation through R&D, and maximise the growth benefits of its clean energy mission.
Reeves reiterated her manifesto commitments to not increase taxes on working people, but employers’ national insurance rose, one of several measures that had been expected.
It is being increased by 1.2 percentage points to 15% from April, while the threshold will be reduced from £9,100 to £5,000 – raising £25bn over the next five years.
The employment allowance is being increased, to take 865,000 businesses out of the NI regime, with another 1m businesses will be unaffected by the increase.
“We need to drive growth, promote entrepreneurship and support wealth creation while raising the revenue required to fund our public services and restore our public finances,” she said.
As expected, the pre-Budget speculation on capital gains tax (CGT) changes was much greater than the reality, but the higher rate will rise from 24 to 28%, although CGT rates on housing will be maintained.
Carried interest – which is a share of the profits of an investment paid to the investment manager – will see its CGT rates increased to 32% from next April with Reeves promising to “deliver further reform” from April 2026.
Entrepreneurs’ relief, now called business asset disposal relief, will jump from 10% to 14% in April, and 18% from the following year.
She unveiled a “corporate tax road map, providing the business certainty called for”, which confirmed the Government’s commitment to cap the rate of corporation tax at 25% for the duration of this Parliament.
Reeves repeated her charge of the Conservatives having left a £22bn black hole that was “a series of promises that they made but had no money to deliver”.
A separate review by the Office for Budget Responsibility (OBR) has been published today into the Spring Budget forecasts and concluded their forecast would have been “materially different”.
Reeves said that means “any comparison between today’s forecast and the OBR’s March forecast is false”.
In a confident performance, the Chancellor confirmed her investment rule, which effectively takes capital investment outside of the equation to deliver a balanced budget.
This will be managed by “four key guardrails” of using delivery bodies like the National Wealth Fund, strengthening the role of institutions to improve infrastructure delivery, setting capital budgets for five years, and having annual audits of financial investments by the National Audit Office.
The investments announced in the House included capitalising the Leeds-headquartered National Wealth Fund and driving forward the modern industrial strategy.
This will be done through multi-year funding commitments, including £1bn for R&D in the aerospace sector, £2bn for the automotive sector, and up to £520m for a new life sciences innovative manufacturing fund.
Significant transport investment included funding the Transpennine rail upgrade, and work at Bradford Forster Square and Manchester Victoria, and
HS2 committing the funding for tunnelling work to take HS2 from Old Oak Common to London Euston.
Mayoral authorities in Greater Manchester and the West Midlands will be the first mayoral authorities to receive integrated settlements from next year, which Reeves said would give “meaningful control of the funding for their local areas”.
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