Dear Friend,
Yesterday saw the first Budget by a Labour government for 14 years, and the first ever Budget delivered by a woman Chancellor, Rachel Reeves. As well as being a woman, Rachel is unusual in being a Chancellor with a Masters degree in Economics and a career in the profession which included working at the Bank of England.
She has been handed a challenging inheritance; £22 billion of unfunded in-year spending pressures, debt at its highest since the 1960s, unrealistic plans for departmental spending, and stagnating living standards.
Those who had been battered by the cost-of-living crisis were in desperate need of support. Public services which had been starved of resources to the point of collapse were in desperate need of an injection of funding. The country’s infrastructure was crumbling after years of neglect.
I believe she delivered what will prove to be a transformational Budget. It is one that understands and recognises the value of investing in our services, our infrastructure and our people.
The commitment to rebalancing the wealth of this country and restoring living standards is clearly illustrated in the graphic below which shows whose lives this Budget will positively impact and by how much.
Addressing the cost of living
In 2022/23, UK household’s disposable income fell by 2.1 per cent, the largest year-on-year drop since records began in the 1950s. To put money into the pockets of those earning least, the Chancellor raised the minimum wage to £12.21 an hour from April 2025. This is the highest real value in the history of the UK’s minimum wage and means a pay-rise for 3 million workers. Someone working full-time on minimum wage will get an extra £1,400 a year.
I know what an invaluable job carer’s do and from my constituency work how much of a struggle it can be. So, I was delighted to hear Rachel Reeves announce that the Carer’s Allowance weekly earnings limit will be increased by £45 per week. This will make a big difference to so many people. There are also changes being made to ensure that the awful situation we have seen develop where carer’s have been asked to pay large sums back because their earnings slipped over the threshold without anyone noticing will not be repeated.
Another problem with overpayments, this time with Universal Credit, has been addressed. It is something that happens quite a lot, as UC for those in work is calculated on a monthly basis and if your income varies every month overpayments can easily occur. A new fair repayment rate will mean UC claimants who have been accidentally overpaid will only have to pay back 15% of their allowance each month, falling from 25%. This means a gain of around £420 a year for roughly 1.2 million households, and I know it will help locally because I have often heard from constituents struggling because of these repayments.
Free breakfast clubs for all primary school children is a manifesto pledge and Rachel Reeves confirmed there would be £30 million available. A ‘test and learn’ phase will begin from April 2025 in 750 early adopter schools in advance of the national rollout. This will boost parent’s finances as well as ensuring every child starts the school day with a proper meal, whatever their circumstances.
Rachel Reeves also confirmed the extension of the Household Support Fund with an increase in funding to £1 billion. This money goes to councils specifically to support those most in need. This extra funding has allowed both Hull City Council and East Riding Council to make automatic £200 payments to pensioners just above the pension credit threshold who no longer receive Winter Fuel Payments.
The full new State Pension will rise £470 a year and the full basic State Pension will increase by £360.
Fuel duty and reduced tax on a pint of beer by 1p.
Along with keeping income tax, personal National Insurance contributions and VAT unchanged, Rachel Reeves has made changes that will directly benefit the majority of our country. It’s also worth remembering that a boost for those on the lowest incomes is also a boost for the economy. Most of their income gets spent, going straight back into the economy, much of it locally. This is particularly important for places like Hull.
Public services
There will be an essential boost in real-terms spending on public services and investment by £326 billion across the next five years.
The new investment in the NHS is huge. There is £1.5 billion capital funding for new surgical hubs, diagnostic scanners and new beds which together with the £22.6 billion for day-to-day spending over the next two years will deliver an extra 2 million NHS operations, scans and appointments a year. This will bring waiting lists down, help shift more care into the community and begin to ease the pressure on staff.
In our schools there will be more funding to address teacher shortages in key subjects and £2.3 billion increase in the core budget to increase per pupil spending in real terms.
However, this isn’t about “throwing money” at a problem. The government has been clear from the start it will not tolerate wasteful spending – and that means treating taxpayers’ money with respect. For the next financial year, all government departments will have a 2% productivity, efficiency and savings target.
We are also pursuing Covid fraud. A Covid Counter-Fraud Commissioner is due to be appointed and over £600 million of fraud which the previous government had ordered written off will now be back under investigation.
Additionally, those who owe tax should pay it. Tax loop-holes have been tightened and HMRC will recruit 180 new counter-fraud staff to crack down on tax fraud and evasion.
Infrastructure
If we are to get the country back on its feet, we need to understand not only the value of investing in people but of investing in our infrastructure, and of planning for the long-term.
No-one can have failed to notice the state of our roads has got worse. To bring them up to scratch, Rachel Reeves has pledged a total of £1.6 billion to fixing local roads and filling potholes. This isn’t just cosmetic: roads in poor repair have a knock-on effect in extra costs to the economy in vehicle repairs and accidents.
As well as more funding to repair the NHS estate, there will be £1.4 billion to tackle crumbling school and college buildings across the country. This paves the way for a long-term strategy to improve schools nationwide so that students can learn in safe, modern buildings.
And we need more affordable housing, whether that’s to rent or buy. The Affordable Homes Programme to kickstart the biggest increase to social and affordable housebuilding in a generation and this Budget added £500 million to the funding.
Protections for small business
Obviously, government revenues have had to be increased. One source was increasing employer National Insurance contributions. However, small businesses have been protected from the impact by increasing and expanding Employment Allowance, allowing firms to employ up to four National Living Wage workers full time without paying employer National Insurance on their wages.
The Treasury will also provide relief on business rates of 40% for the retail, hospitality and leisure industry and from 2026-27 permanently lower tax rates will be introduced.
A Budget for the future
This is a responsible, joined-up Budget by a Chancellor who understands how government finances and markets work. It might come as no surprise then that the International Monetary Fund, who criticised Liz Truss’s disastrous budget and warned Jeremy Hunt about his unfunded tax cuts has praised this budget’s investment in public services and “sustainable tax rises.” It is the Budget of a government which is determined to rebuild the foundations of our economy and our public services, lift up those on the lowest incomes and to make work pay.
