Autumn Budget 2024: A summary

The Chancellor of the Exchequer, Rachel Reeves, presented her 2024 Autumn Budget to Parliament on 30 October and published supporting documents on the gov.uk website. She is the first woman to deliver a UK Budget. This is the Labour Party’s first Budget for more than 14 years.

When the Chancellor finished her statement in the Commons, the Office for Budget Responsibility (OBR) published updated forecasts for the UK’s economic and fiscal outlook. The OBR is the independent public finances watchdog that produces the official forecasts for the economy and public finances used by the Chancellor.

The Chancellor has increased government spending by around 2% of GDP a year, on average, over the next five years. One-third of the additional spending will go on government’s investment spending on things such as transport, housing, and research and development (R&D). The remaining two-thirds will go on government’s day-to-day spending.

Half of the increase in spending is funded through an increase in taxes, mainly through higher employer National Insurance contributions (NICs) and capital taxes. The remaining half is funded largely through additional borrowing.

The Chancellor said the Budget is “restoring stability to our public finances and rebuilding our public services” and restoring “economic stability”.

Selected tax announcements Employer NICs

The employer NICs rate will be increased from 13.8% to 15% from April 2025, when the threshold above which employer NICs is paid will additionally be reduced from £9,100 a year to £5,000 a year. For some employers, increases will be at least partly mitigated by increases to the employment allowance. The employment allowance allows employers to reduce the total amount of National Insurance they pay per year.

Capital taxes

The main rates of capital gains tax will increase from 30 October 2024. The Business Asset Disposal Relief (BADR) and Investors' Relief (IR) rates will increase in April 2025 and April 2026.

Inheritance tax will apply to pension wealth that is transferable at death (unused pension funds and death benefits) from 6 April 2027. There will be changes to how agricultural property relief (APR) and business property relief (BPR) work for inheritance tax.

Manifesto commitments

Various tax measures from Labour’s manifesto were confirmed, including applying VAT to private school fees, increasing the energy profits levy and changing the residence-based regime (which is already set to replace the ‘non-dom’ regime).

Other announcements

The Budget includes compensation payments to victims of the Post Office Horizon IT and infected blood scandals. An additional £1.8 billion in total has been set aside for the Horizon scandal (for 2024/25 to 2026/27) and £11.8 billion in total for victims of the infected blood scandal (for 2024/25 to 2029/30)

The Chancellor announced that the Carer’s Allowance weekly earnings limit will be increased from £151 per week in 2024/25 to £196 in 2025/26.

Various measures to tackle fraud and error in the welfare system were announced, including additional staff to work on fraud and error across the Department for Work and Pensions (DWP) and HMRC, and expanding the DWP’s debt recovery powers in cases of fraud and error. The government also increased spending to help spot incorrect Universal Credit claims and to verify changes in Universal Credit claims.

There will be a reduction on discounts under the housing Right to Buy scheme and councils will be able to keep all receipts generated by sales. £500 million will be contributed to the Affordable Homes Programme for 2025/26.

The government will make investments in infrastructure including through the National Wealth Fund.

Fiscal rules

The Chancellor has proposed two new fiscal rules.

One focuses on balancing the day-to-day budget (or current budget), and the other says government’s net financial liabilities should be falling, relative to the size of the economy. Public sector net financial liabilities (PSNFL) measures the government’s debt and other financial liabilities minus its liquid financial assets (like foreign exchange reserves) and illiquid financial assets (like loans and other financial derivatives). It is a measure of the government’s broader balance sheet.

Both rules initially apply to 2029/30, meaning that the current budget should be balanced in 2029/30 and PSNFL should be falling (as a percentage of the economy) in 2029/30. To balance the current budget, government revenues from taxes and other sources must cover day-to-day spending on areas such as public services and welfare. If the current budget is balanced (or in surplus), the government won’t be borrowing to fund day-to-day spending.

In 2026/27, when 2029/30 becomes the third year of the forecast period, the third year of the rolling forecast period becomes the target year. Once focusing on the third year of the forecast, the current budget will be deemed to be in balance if it is in surplus, or in deficit of no more than 0.5% of GDP.

Both the new rules are being met in the OBR’s October 2024 forecast.

Spending Review and public spending

This Budget included Phase 1 of a new Spending Review. These reviews fix departmental spending plans for the years ahead.

In Phase 1, the government has set departmental budgets for 2024/25 and 2025/26, with budgets for 2026/27 and 2027/28 expected to follow in Phase 2 in spring 2025.

Day-to-day spending: 2024/25 and 2025/26

Day-to-day spending limits will increase by £33 billion between 2024/25 and 2025/26. The Department for Health and Social Care accounts for around a third of this increase, with the Department for Education accounting for a further 13%. The Scottish Government and the Ministry for Housing, Communities and Local Government (MHCLG) local government budget each account for a further 5%.

A few departments will receive real-terms (inflation-adjusted) decreases in their spending limits between 2023/24 and 2024/25.

Investment spending: 2024/25 and 2025/26

Investment spending (officially, ‘capital DEL’) will increase by £14.7 billion between 2024/25 and 2025/26.

The increases in investment spending are spread more evenly between departments than increases in day-to-day spending.

Longer-term spending totals

The Budget also set spending limits for government as a whole across the new Spending Review period, as well as giving long-term spending forecasts. The OBR forecasts that spending will rise slightly from 44.9% of GDP in 2023/24 to 45.3% in 2025/26, before falling back to 44.5% in 2029/30.

Spending as a proportion of GDP increased sharply during the covid-19 pandemic, and these forecasts suggest that it will now stay at around the same level as in the past few years. This level remains high by historical standards (having gone above 44% in only 11 years between 1948 and 2023/24),

The OBR’s economy forecast

The OBR’s forecasts are the official forecasts used by the Chancellor for the Budget. They incorporate the impact of the policy decisions that the Chancellor has announced.

The OBR’s previous forecasts were published in March 2024.

Government policy and growth

The broad themes of this Budget – large increases in spending, taxes and borrowing – impacted the OBR’s forecasts for economic growth.

In summary, the extra government spending temporarily boosts GDP in the next few years (mostly in 2025 and 2026) before fading to close to zero by the end of the OBR’s five-year forecast in 2029.

GDP growth

GDP growth is forecast to accelerate from 1.1% in 2024 to 2.0% in 2025, before slowing to 1.8% in 2026 and around 1.5% over 2027 to 2029, as the chart below shows.

OBR expectations for growth in 2025 and 2026 are higher than those from most other forecasters, including the Bank of England, which in August forecast GDP growth of 1.0% in 2025 and 1.3% in 2026.

Inflation

The OBR forecasts the annual rate of inflation, as measured by the Consumer Prices Index (CPI), to be higher over the next four years than it expected in March 2024, as the chart below shows.

The OBR’s public finances forecast

The Office for Budget Responsibility (OBR) forecasts that government borrowing will increase from £122 billion in 2023/24 to £127 billion in 2024/25. Borrowing is then forecast to fall each financial year before it gets to
£71 billion in 2029/30, the final year of the OBR’s current forecast period.

The OBR forecasts that borrowing from 2024/25 will be £28 billion higher, on average, a year compared with the March 2024 forecast. This is largely because the Chancellor’s spending measures cost more (around £70 billion a year) than her net tax increases (around £36 billion a year) raise.

Government debt was equivalent to 97.8% of GDP at the end of 2023/24. On 30 October, the OBR forecast that it will increase to 98.4% at the end of 2024/25. It will then fall to around 97% in 2025/26 and remain around that level for the rest of the forecast period, as the chart below shows.

What happens next?

Immediately after the Budget statement, the House of Commons approved a motion so that changes to VAT, stamp duty land tax and tobacco duties could take effect on 30 October.

The Budget debate began in the House of Commons with a speech from the Leader of the Opposition. It will end on 6 November, at which time MPs will be asked to vote on the Budget resolutions.

Each resolution relates to a specific tax proposal. Resolutions that the House agrees to will then be incorporated in the Finance Bill 2024-25, which will give them permanent legal effect.

Separate legislation will be required to give effect to changes to NICs. This is because the Finance Bill’s remit specifically excludes any tax that does not raise money for financing central government as a whole. The Finance Bill therefore cannot include provisions relating to NICs, as receipts are collated in the National Insurance Fund.

Further information summarising the OBR’s economic and fiscal forecasts are provided in the full Library briefing.

The Library briefing Autumn Budget 2024: Reactions provides links analysis of the 2024 Autumn Budget from selected think tanks, business groups, political parties and other organisations.

For a quick explainer on the Budget process, see our Insight: What is the Budget?

The Library briefing The Budget and the annual Finance Bill examines the way that Parliament scrutinises the Government's proposals for taxation.

The Library briefing National Insurance contributions: an introduction gives an introduction to National Insurance system.

Find all of the Library’s research on the 2024 Autumn Budget in one place.