UK’s Reeves announces budget plans to parliament

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(Reuters) – British finance minister Rachel Reeves announced her budget plans to parliament on Wednesday, seeking to shore up public services and plug a funding gap, without damaging a promise to promote growth and investment.

Below are quotes on the key issues:

REEVES ON INCREASE TO HEALTH BUDGET

“Because of the difficult decisions that I have taken on tax, welfare and spending, I can announce that I am providing a £22.6bn increase in the day to day health budget and a £3.1bn increase in the capital budget over this year and next year. This is the largest real-terms growth in day to day NHS spending outside of Covid since 2010.”

REEVES ON INVESTMENT IN SCHOOLS

“I am providing £6.7bn of capital investment to the Department for Education next year, a 19% real-terms increase on this year. That includes £1.4bn to rebuild over 500 schools in the greatest need.

“We will provide a further £2.1bn to improve school maintenance, £300m more than this year.”

REEVES ON GREEN HYDROGEN PROJECTS

“Today, I am providing funding for 11 new green hydrogen projects across England, Scotland and Wales – among the first commercial scale projects anywhere in the world.”

REEVES ON NEW DEBT METRIC

“We will target debt falling as a share of the economy. Debt will be defined as Public Sector net Financial Liabilities, or ‘net financial debt’ for short, a metric that has been measured by the Office for National Statistics since 2016 and forecast by the Office for Budget Responsibility since then too. ‘Net financial debt’ recognises that government investment delivers returns for the taxpayer by counting not just the liabilities on a government’s balance sheet, but the financial assets.”

REEVES ON MOVE AWAY FROM AUSTERITY

“I said there would be no return to austerity, and that is the choice I have made today.”

REEVES ON INVESTMENT RULE

“Like our stability rule, our investment rule will apply in 2029-30 until that becomes the third year of the forecast. From that point onwards, net financial debt will fall in the third year of every forecast. Today, the OBR say that we are already meeting our target two years early with ‘net financial debt’ falling by 2027-28, with £15.7bn of headroom in the final year.”

REEVES ON FUNDING FOR HOMEBUILDING

“Today, I am providing over £5bn of government investment to deliver our plans on housing next year. We will increase the Affordable Homes Programme to £3.1bn, delivering thousands of new homes.

“We will provide £3bn of support in guarantees to boost the supply of homes and support our smaller housebuilders.”

REEVES ON ‘NON DOM’ TAX REGIME

“We will abolish the non-dom tax regime and remove the outdated concept of domicile from the tax system from April 2025. We will introduce a new, residence based scheme with internationally competitive arrangements for those coming to the UK on a temporary basis while closing the loopholes in the scheme designed by the party opposite.

“To further encourage investment into the UK, we will also extend the Temporary Repatriation Relief to three years and expand its scope bringing billions of pounds of new funds into Britain. The independent Office for Budget Responsibility say that this package of measures will raise £12.7bn over the next five years.”

REEVES ON STAMP DUTY LAND TAX

“We are increasing the stamp-duty land tax surcharge for second-homes, known as the “Higher Rate for Additional Dwellings”, by 2 percentage points, to 5%, which will come into effect from tomorrow. This will support over 130,000 additional transactions from people buying their first home, or moving home over the next five years.”

REEVES ON ENERGY WINDFALL TAX

“We committed to reform the Energy Profits Levy on oil and gas companies. I can confirm today that we will increase the rate of the levy to 38%, which will now expire in March 2030, and we will remove the 29% investment allowance. To ensure the oil and gas industry can protect jobs and support our energy security we will maintain the 100% first year allowances and the decarbonisation allowance too.”

REEVES ON PUBLIC SERVICES

“I am able to provide an injection of immediate funding over the next two years to stabilise and support our public services.

“The next phase of the Spending Review will report in late Spring, and I have set the overall envelope today. Day to day spending from 2024-25 onwards will grow by 1.5% in real terms… … and total departmental spending, including capital spending, will grow by 1.7% in real terms.”

REEVES ON DEFENCE SPENDING

“We are conducting a Strategic Defence Review to be published next year. And as set out in our manifesto, we will set a path to spending 2.5% of GDP on defence at a future fiscal event. Today, I am announcing a total increase to the Ministry of Defence’s Budget of £2.9bn next year, ensuring the UK comfortably exceeds our NATO commitments and providing guaranteed military support to Ukraine of £3bn per year, for as long as it takes.”

REEVES ON CAPITAL GAINS TAX

“Today, we will increase the lower rate of Capital Gains Tax from 10% to 18%, and the higher rate from 20% to 24% while maintaining the rates of capital gains tax on residential property at 18% and 24%, too. This means the UK will still have the lowest Capital Gains Tax rate of any European G7 economy.”

REEVES ON INHERITANCE TAX

“The previous government froze inheritance tax thresholds until 2028. I will extend that freeze for a further two years, until 2030. That means the first £325,000 of any estate can be inherited tax-free, rising to £500,000 if the estate includes a residence passed to direct descendants, and £1m when a tax free allowance is passed to a surviving spouse or civil partner.

REEVES ON TOBACCO DUTY

“The government will renew the Tobacco Duty escalator for the remainder of this Parliament at RPI+2%, increase duty by a further 10% on hand-rolling tobacco this year, introduce a flat rate duty on all vaping liquid from October 2026 alongside an additional one off increase in tobacco duty to maintain the incentive to give up smoking.”

REEVES ON ELECTRIC VEHICLE INCENTIVES

“We want to support the take-up of electric vehicles. So I will maintain incentives for electric vehicles in Company Car Tax from 2028 and increase the differential between fully electric and other vehicles in the first year rates of Vehicle Excise Duty from April 2025. These measures will raise around £400m by the end of the forecast period.”

REEVES ON EMPLOYMENT ALLOWANCE

“I am today increasing the Employment Allowance from £5,000 to £10,500. This means 865,000 employers won’t pay any National Insurance at all next year and over 1 million will pay the same or less as they did previously. This will allow a small business to employ the equivalent of 4 full time workers on the National Living Wage without paying any National Insurance on their wages.”

REEVES ON FUEL DUTY

“I have today decided to freeze fuel duty next year and I will maintain the existing 5p cut for another year, too. There will be no higher taxes at the petrol pumps next year.”

REEVES ON NATIONAL INSURANCE CONTRIBUTIONS

“We will increase the rate of Employers’ National Insurance by 1.2 percentage points, to 15%, from April 2025. And we will reduce the Secondary Threshold – the level at which employers start paying national insurance on each employee’s salary – from £9,100 per year to £5,000. This will raise £25bn per year by the end of the forecast period. I know that this is a difficult choice. I do not take this decision lightly.”

REEVES ON INFLATION FORECASTS

“The cost of living crisis under the last government stretched household finances to their limit, with inflation hitting a peak above 11%. Today, the OBR say CPI inflation will average 2.5% this year, 2.6% in 2025, then 2.3% in 2026, 2.1% in 2027, 2.1% in 2028 and 2.0% in 2029.”

REEVES ON GROWTH FORECASTS

“The OBR forecast that real GDP growth will be 1.1% in 2024, 2.0% in 2025, 1.8% in 2026, 1.5% in 2027, 1.5% in 2028 and 1.6% in 2029. And the OBR are clear: this budget will permanently increase the supply capacity of the economy, boosting long-term growth.”

REEVES ON FISCAL RULES

“We set out the fiscal rules that would guide this government. I am confirming those today: our stability rule and our investment rule. The ‘stability rule’ means we will bring the current budget into balance so that we do not borrow to fund day to day spending. We will meet this rule in 2029-30, until that becomes the third year of the forecast.”

REEVES ON BALANCING BUDGET

“We will balance the current budget in the third year at every budget, held annually each autumn. That will provide a tougher constraint on day-day-spending so difficult decisions cannot be constantly delayed or deferred.

“The OBR say that the current budget will be in deficit by £26.2bn in 2025-26 and £5.2bn in 2026-27 before moving into surplus of £10.9bn in 2027-28, £9.3bn in 2028-29 and £9.9bn in 2029-30 meeting our stability rule two years early.”

REEVES ON BORROWING

“The OBR confirms that borrowing in this financial year is now £127 bn, reflecting the inheritance left by the party opposite. The increase in the net cash requirement in 24-25 is lower than the increase in borrowing, at £22.3bn higher than the spring forecast. Because of the actions we are taking, borrowing falls from 4.5% of GDP this year to 2.1% of GDP by the end of the forecast. Public sector net borrowing will be £105.6bn in 2025-26, £88.5bn in 2026-27, £72.2bn in 2027-28, £71.9bn in 2028-29 and £70.6bn in 2029-30.”

REEVES ON MINIMUM WAGE

“I can confirm that we will accept the Low Pay Commission recommendation to increase the National Living Wage by 6.7% to £12.21 an hour, worth up to £1,400 a year for a full-time worker.

“And for the first time, we will move towards a single adult rate, phased in over time, by initially increasing the National Minimum Wage for 18-20 year olds by 16.3% as recommended by the Low Pay Commission, taking it to £10 an hour.”

REEVES ON STATE PENSION

“Our manifesto committed to the Triple Lock meaning spending on the State Pension is forecast to rise by over £31bn by 2029-30 to ensure that our pensioners are protected in their retirement. This commitment means that while working age benefits will be uprated in line with CPI, at 1.7%, the basic and new State Pension will be uprated by 4.1% in 2025-26.”

REEVES ON MAKING SAVINGS

“It is vital that we are driving efficiency and reducing wasteful spending. In July, to begin dealing with our inheritance, I made £5.5bn of savings this year. Today we are setting a 2% productivity, efficiency and savings target for all departments to meet next year by using technology more effectively and joining up services across government.”

REEVES ON COMPENSATION TO THOSE AFFECTED BY BLOOD CONTAMINATION SCANDAL

“Today, for the very first time, we will provide specific funding to compensate those infected and those affected, in full, with £11.8bn in this budget.

“I am also today setting aside £1.8bn to compensate victims of the Post Office Horizon scandal, redress that is long overdue for the pain and injustice that they have suffered.”

REEVES ON DRIVING GROWTH

“The only way to drive economic growth is to invest, invest, invest. There are no shortcuts. And to deliver that investment we must restore economic stability and turn the page on the last 14 years.”

REEVES ON INHERITED BUDGET BLACK HOLE

“The Office for Budget Responsibility have published their own review of the circumstances around the Spring Budget forecast. They say that the previous government – and I quote – ‘did not provide the OBR with all the available information to them’ and that, had they known about these ‘undisclosed spending pressures that have since come to light’ then their Spring Budget forecast for spending would have been, and I quote again: ‘materially different’.

“Let me be clear: that means any comparison between today’s forecast and the OBR’s March forecast is false because the party opposite hid the reality of their public spending plans.”