Budget 2024: Chancellor raises child benefit threshold from £50k – and confirms national insurance will be cut by 2p
The chancellor has confirmed a 2p cut to national insurance and increased child benefit thresholds.
In the budget, Jeremy Hunt said “permanent cuts in taxation” were possible because of the progress made in bringing down inflation – with forecasts suggesting it will fall to the target level of 2% within months.
More parents will be paid child benefit after the £60,000 threshold, beyond which no payment is currently made, will be extended to £80,000 from next month.
Budget live: No rabbit out of the hat on income tax from chancellor
At present if one parent earns £50,000 a year child benefit payments are reduced. Following Mr Hunt’s announcement such payments won’t be tapered off until a parent is paid £60,000 annually.
The policy change will help 170,000 families with children under 16, or under 20 if they are in full-time education or training, Mr Hunt said.
Eligible parents receive £24 a week for their first child and £15.90 for other each of their other children. These sums will rise to £25.60 and £16.95 a week next month.
Also due to change is the way child benefit is assessed.
It will move away from the present system, where just one parent earning £50,000 means the entitlement is tapered off, to whole household eligibility, whereby the income of parents is looked at together.
Read more:
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The key announcements of the 2024 Budget
But this new joint assessment is won’t take effect until April 2026.
Average savings of around £1,300 will be made by nearly half a million families next year of the changes, Mr Hunt said.
Mr Hunt indicated plans to completely scrap national insurance contributions, branding it “double taxation”. National insurance brought in around £177bn in the 2022-23 period in tax.
Mr Hunt spoke about cutting taxes to increase growth, and the official Office for Budget Responsibility (OBR) forecast predicted that living standards will grow faster than expected.
But real disposable household income is not expected to recover to pre-pandemic levels until the 2025-26 period, after the next election.
And the tax burden is also set to continue to rise – albeit at a slightly reduced level when compared to last autumn’s forecast.
In total, the government will take £19.7bn more in tax by 2029 than forecasted in March 2021, even when the cuts to national insurance are included, due to fiscal drag.
Scrapping the “non-doms” regime, which allowed certain wealthy individuals to avoid paying tax on their foreign income, is expected to raise £2.7bn a year.
Rishi Sunak was recused from the decision on non-dom tax to avoid any perceived or potential conflicts of interest.
In terms of spending, Mr Hunt earmarked almost £6bn for the NHS – with artificial intelligence set to be used to “cut form-filling for doctors” in a digitisation drive.
A 5p cut to fuel duty will be extended for another 12 months – with the government “backing the Great British pub” by holding the price of beer, wine and spirits steady until February 2025.
Meanwhile, Britons will be able to invest up to £5,000 in UK companies tax-free – in addition to their current ISA allowance – through a new “British ISA”.
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Chancellor cuts national insurance in budget
He also announced:
• The High Income Child Benefit Charge threshold will increase from £50,000 to £60,000
• A new excise duty on vaping, as well as a one-off increase to tobacco duty
• The higher capital gains tax rate on property will fall from 28% to 24%
• The VAT registration threshold will rise from £85,000 to £90,000 from 1 April – the first increase in seven years
• A fund aimed at supporting vulnerable households with the cost of living will be extended by a further six months
• The UK economy is expected to grow by 0.8% this year – and 1.9% in 2025
• Hundreds of millions of pounds to tackle “historic underinvestment in our nations and regions”
The 2p cut to national insurance was widely trailed – and follows a previous 2p cut announced in the autumn statement. Combined, this could save the average worker up to £900 a year.
But the chancellor had faced calls from Tory MPs to cut income tax or unfreeze tax thresholds to prevent Britons from being dragged into higher bands when they get pay rises.
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Awkward wait for chancellor outside No 11
Mr Hunt is already facing anger from Scottish Conservatives, after he announced an extension of the windfall tax on profits made by energy companies in the North Sea.
The leader of the Scottish Tories, Douglas Ross, said he would not vote with the legislation – implying he would either oppose or abstain on the motion to introduce the measure.
Andrew Bowie, a Tory minister, said the will be “working with” Mr Ross to “resolve” the matter.
Labour leader Sir Keir Starmer said the budget was “bereft of ideas”.
This budget is set to be the last before the election – with Mr Hunt under pressure to revive economic growth and the government’s prospects at the ballot box.
The UK economy slipped into a technical recession at the end of last year, and the Tories are about 20 points behind in the opinion polls.
Money blog: What budget means for you
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Why don’t we know when the UK election is?
Before the budget was announced, shadow chancellor Rachel Reeves said: “The Conservatives promised to fix the nation’s roof, but instead they have smashed the windows, kicked the door in and are now burning the house down.
“Taxes are rising, prices are still going up in the shops and we have been hit by recession. Nothing the chancellor says or does can undo the economic vandalism of the Conservatives over the past decade.”
A child has died in a house fire in Bradford.
A woman and three other children managed to escape the property and are being treated in hospital for non-life-threatening injuries.
In a statement, West Yorkshire Police said: “At 1.08 this morning (5 May) police were called by the fire service to reports of a serious house fire on Kingsdale Drive, Bradford.
“A woman and three children managed to escape the property and were taken to hospital for treatment. Their injuries are not life-threatening.
“A fourth child was found inside the address and was sadly pronounced deceased at the scene,” police added.
“A scene is currently in place at the address and police are working with the fire investigators to establish the exact cause of the fire.”
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Rishi Sunak has urged Tories to stick with his leadership despite the Conservatives’ shock defeat in the West Midlands mayoral election, which capped a dire few days of results for the party.
Sir Keir Starmer called it a “phenomenal result” which was “beyond our expectations” as Labour’s Richard Parker ousted Tory incumbent Andy Street, who had held the role for seven years.
The margin of victory was a cruelly tight 1,508 votes, and compounded Conservative disappointment as it followed another loss to Sadiq Khan in London, who secured a record-breaking third term as the capital’s mayor.
Local elections live
The mayoral election results
“People across the country have had enough of Conservative chaos and decline and voted for change with Labour. Our fantastic new mayor Richard Parker stands ready to deliver a fresh start for the West Midlands,” Sir Keir said.
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‘Devastated’ Andy Street refuses to blame Sunak after West Midlands defeat
However, in an effort to win back those who had deserted his party over Labour’s stance on Gaza, he added: “I say directly to those who may have voted Labour in the past but felt that on this occasion that they couldn’t that across the West Midlands we are a proud and diverse community.
“I have heard you. I have listened. And I am determined to meet your concerns and to gain your respect and trust again in the future.”
Labour suffered losses to independents and George Galloway’s Worker’s Party of Britain in areas with large Islamic populations as a result of the war between Israel and Hamas.
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Starmer speaks at East Midlands victory rally
But the party virtually swept the mayoral elections board across England, winning in Liverpool, South Yorkshire, West Yorkshire, and in Greater Manchester, where Andy Burnham returned to power.
The Tees Valley was the only remaining splash of blue left on the mayoral election map, where Lord Ben Houchen managed to cling to power despite a huge 14.1-point swing to Labour.
Lord Houchen’s victory was also mired by allegations he had sought to distance himself from Rishi Sunak and the Conservative Party at large during his campaign.
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Sadiq Khan re-elected as London Mayor
Losing Mr Street, who is widely respected in the Tory Party and had an impressive track record of bringing investment into the West Midlands, is a body blow to the prime minister.
Despite the drubbing, Mr Sunak urged his party to stick with his leadership and his plan for government.
In a statement, he said: “It’s been disappointing of course to lose dedicated Conservative councillors and Andy Street in the West Midlands, with his track record of providing great public services and attracting significant investment to the area, but that has redoubled my resolve to continue to make progress on our plan.
“So we will continue working as hard as ever to take the fight to Labour and deliver a brighter future for our country.”
Rishi Sunak with Tees Valley mayor Lord Ben Houchen Pic: Reuters
However, Suella Braverman, the former home secretary, was quick to lay the blame for Tory losses firmly at the door of Number 10.
But she said ousting Mr Sunak “won’t work”, adding: “The hole to dig us out of is the PM’s, and it’s time for him to start shovelling.”
She urged him to adopt “strong leadership, not managerialism” on tax, migration, small boats, and law and order.
But Mr Street took a different view, encouraging the party not to veer to the right.
Asked if he is worried the party is drifting to the right and over-emphasising the threat from Reform UK while “ignoring other voters”, the outgoing mayor told Sky News: “I would definitely not advise that drift.
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Analysis of local election and mayoral results
Read more:
Charts tell story of Conservative collapse
Who is the new West Midlands mayor Richard Parker?
“The psychology here is really very straightforward, isn’t it? This is the youngest, most diverse, one of the most urban places in Britain, and we’ve done, many would say, extremely well over a consistent period,” Mr Street said.
“The message is clear: winning from that centre ground is what happens.”
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‘We will give this region a fresh start’ – Labour’s Richard Parker
Results are in from 106 of the 107 councils in England that held elections on 2 May, and Labour has won 1,140 seats, an increase of more than 200.
The Liberal Democrats beat the Tories into second place, winning 521 seats, up nearly 100.
The Tories were just behind on 513 seats, down nearly 400.
UK
Conservative Andy Street suffers shock loss to Labour in West Midlands mayoral race in blow to Rishi Sunak
Tory incumbent Andy Street has suffered a shock defeat to Labour in the West Midlands mayoral election after a partial recount was ordered.
Labour’s Richard Parker beat Mr Street by just 1,508 votes – 0.25% – to deliver a major blow to Rishi Sunak in the key electoral battleground after a hammering in the local elections.
With the race neck-and-neck, in the end it came down to the results in one borough – Labour-supporting Sandwell.
“This is the most important thing I will ever do,” Mr Parker said in his acceptance speech.
“I promise you that I will deliver jobs,” he added.
He told Sky News he would take buses “back into public control” and deliver the “largest programme of social housing we’ve had in this region for more than 40 years”.
And he thanked his predecessor, who he said had “led this region through a number of great challenges and you deserve great credit for that”.
Mr Street told Sky News he was “personally devastated”, had “put my all into this”, and “genuinely believed we were making real progress across the region”.
He said it was “my campaign, totally”, adding: “I’m not going to try to push responsibility anywhere else. There’ll be no sloping shoulders from me.”
He wished his successor “all strength and wisdom”.
Labour leader Sir Keir Starmer said it was a “phenomenal result” and “beyond our expectations”.
He added: “People across the country have had enough of Conservative chaos and decline and voted for change with Labour.
“My changed Labour Party is back in the service of working people, and stands ready to govern.”
Labour’s Richard Parker has promised to deliver jobs
Local elections live
The mayoral election results
Ellie Reeves, Labour’s deputy national campaign co-ordinator, said it was a “significant victory”.
She added: “Right across the country people have voted for change and the message is clear – it’s time for a general election and a Labour government to get our country’s future back.”
Labour’s Sadiq Khan has secured a historic third term as London mayor with a convincing win over Conservative rival Susan Hall.
These results will increase pressure on the prime minister, who had been hoping for a repeat of the success enjoyed by Conservative Ben Houchen who held on as the mayor of Tees Valley.
Sam Coates, Sky News’s deputy political editor, said he had seen messages from Conservative MPs’ WhatsApp group.
One from former cabinet minister Simon Clarke, whom Coates said “wants Rishi Sunak to leave”, said: “These results are awful and should be a massive wake-up call.
“If we fight the same campaign in a few months [in the general election] we’ll get the same outcome or rather worse.
“Reform UK standing more candidates will cause greater damage.”
Read more:
The winners and losers
Charts tell story of Conservative collapse
Analysis: Labour’s future success is less clear-cut
The loss of either the Teesside or West Midlands mayoralties would give Tory rebels who want to change leader a “huge amount of fuel”, former Scottish Conservative leader Ruth Davidson said in the Electoral Dysfunction podcast.
Mr Street, who was seeking a third term in office, sought to distance himself from the Conservative brand during his campaign and instead ran on a personal platform.
Sky News recently revealed that Mr Street was sending out election literature with an endorsement from former prime minister Boris Johnson which urged people to “forget about the government”.
His campaign website also made no mention of Mr Sunak on its homepage and was coloured in green rather than Conservative blue.
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