The first Labour budget in 14 years has been designed, or at least intended, to create long term, structural growth in the economy. A refreshing change from the false prophets in the Conservative party who convinced the nation in 2019 that they could change the climate of fiscal difficulty in the UK through a few quick policy measures. As predicted, Reeves laid out tax increases and increased spending to fund public services and fix the NHS. In contrast to the last 14 years of Conservative government, Labour is planning to raise revenue by taxing those with big wallets, which economists have noted will be a kick in the teeth.
Reeves insists that this budget is for working people, and that by not increasing income tax or national insurance, by extending the temporary 5p cut to fuel duty, and by supporting investment in schools that Labour are doing more for working people. However, critics have been quick to notice that these measures will not create change to working people’s everyday lives.
A refreshing change from the false prophets in the Conservative party who convinced the nation in 2019 that they could change the climate of fiscal difficulty in the UK through a few quick policy measures.
Labour says that from April 2028 personal tax thresholds will be updated in line with inflation. However, as this is a policy that isn’t due to take effect until 4 years time, it moves further away from labours promise of change and drives that image further away from the public imagination too.
Reeves opened her speech with the phrase “The only way to create growth is to invest, invest invest”. But the budget's immediate fiscal implications are not reflective of this. Increased taxes for businesses, including more national insurance contributions and 20% inheritance tax on agricultural estates, are policies that many say will have negative ramifications. Despite some relief for small businesses on national insurance contributions, small businesses will face a stark reduction in the amount of investment that they will be able to accommodate.The rise in National Living Wage (NLW) has been well accepted for those working basic pay jobs, however the façade of huge benefits will undoubtedly be broken when businesses cannot afford to pay their workers.
The new leader of the Conservative Party Kemi Badenoch has recently noted that hurting businesses will hurt growth. And she isn’t entirely wrong. There are arguments on whether consumers will see this as passed down costs but we have yet to see the effects of these measures.
Labour has adopted a clear standpoint on the audiences it intends to target, and this time it’s the rich.
Larger and more fundamental plans include Labours bid to make nationalisation of rail services in the UK the default option. This plan appears to pursue lower costs and to benefit the consumer, but predictions are set on a rise in rail prices from next year. Measures such as these, as well as increased bus fares, mean that the working person will have to pay more to get about. Whilst people are relieved that they will not face the immediate brunt of revenue-raising ventures in the form of tax raises, they may see indirect costs arising from changes. However, working people have been largely protected from the labour’s financial reshape, and the bottom line is that most working people will see very little change in their everyday finances. Rather the government will plan to ‘invest, invest, invest’ in the infrastructure of the economy.
The budget laid out a series of measures that propose investment and protection for working people who make up the backbone of public services. Labour plans to increase the everyday budget of the NHS to £22.6bn and have introduced a 2% productivity plan for every year beginning 2025/26. Reeves also announced new measures to improve care workers' pay to an equivalent of a 16-hour working week, thereby improving their circumstances.
Ultimately, this budget has steered clear of pillaging the pockets of ordinary working people. Labour has adopted a clear standpoint on the audiences it intends to target, and this time it’s the rich. However, this budget embraces a much longer term and structural function which labour hope will bring about lasting change in the UK.
