Budget 2024: What could Chancellor Rachel Reeves announce?

Published

5 months ago

October 16, 2024

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Labour’s first budget in 14 years will be delivered on 30 October, and as per the warnings of Rachel Reeves and Sir Keir Starmer, it will not be one the public is likely to welcome.

The chancellor and prime minister have spent months preparing the stage for a “painful” budget, where tax rises are likely in order to help fill the £22bn financial black hole Ms Reeves said she uncovered on entering No 11 Downing Street.

While Labour promised not to increase taxes on working people during the election campaign, the chancellor did leave some wriggle room that is now a point of speculation ahead of the budget.

Here Sky News takes a look at what measures could be included in the budget and what they could mean.

Sunak tries to wrong-foot Starmer- politics latest

Employer national insurance contributions

National insurance contributions are the UK’s second-largest tax and are expected to raise just under £170bn in 2024-25, about a sixth of all tax revenue, according to the Institute for Fiscal Studies (IFS).

They are paid by employees and the self-employed on their earnings, and by employers on the earnings of their staff – and at a higher rate than staff members themselves pay.

While Labour repeatedly promised not to increase taxes on “working people” during the election campaign – that is, VAT, national insurance and income tax – what it did not rule out was the possibility of increasing employer national insurance contributions.

Employers currently pay 13.8% on their staff earnings, but the tax does not apply to employee pension schemes – this is something the chancellor could now target in the budget, with the IFS saying it could raise £17bn a year.

The Tories have accused Labour of breaking their manifesto promise not to increase national insurance – although Labour believes it made clear the distinction between employees and employers.

Laura Trott, the shadow chief secretary to the Treasury, said: “In 2021, the chancellor said increasing employer national insurance was a tax on ‘workers’.

“That’s why even in her own words it breaks Labour’s manifesto promise not to increase tax on working people.”

Pension changes

Another measure the chancellor is reportedly considering is reducing the amount people can take out of their pensions tax-free.

At present, the tax-free lump sum most people over the age of 55 can take from their pension pot is 25%, up to a maximum of £268,275.

But according to The Telegraph, government officials have asked a major UK pension provider to look into the impact of cutting that amount to £100,000.

Financial advisers are said to be receiving a growing number of calls from clients wanting to cash in their 25% tax-free lump sum ahead of the budget.

Meanwhile, other changes Ms Reeves could make to pensions in a bid to raise revenue is charging national insurance on private pension incomes; introducing income tax on all inherited pensions and making pension pots liable to inheritance tax in the same way as other assets.

Inheritance tax

At present, inheritance tax – dubbed “the most hated tax” by the Tories – is charged at 40% and applies to estates worth more than £325,000.

There are, however, allowances that can mean it’s only paid on more valuable estates.

If a main residence is being passed to children or grandchildren a £175,000 allowance is added, meaning only amounts of £500,000 are subject to inheritance tax.

The tax rate could be increased, or the value people have to pay inheritance from could be lowered – while several exemptions – including on agricultural land and family businesses – could also be lifted.

Capital gains tax

Given the government’s pledge not to increase the three main taxes, there has been speculation that Labour could set its sights instead on capital gains tax.

Capital gains tax is the tax levied on the profit made on the sale of an asset that has risen in value – including second homes, shares, business assets and most personal possessions worth £6,000 or more, apart from cars.

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At present, people do not have to pay tax on the first £3,000 of profits, or £1,500 for trusts.

The tax-free threshold could be removed and the tax could be imposed on assets that are exempt now.

Alternatively, the tax rate could be increased. Capital gains tax is between 20-28% for those who pay higher rates of income tax, but could be increased to as much as 39%, according to The Guardian.

Asked about capital gains tax recently, the prime minister appeared to dismiss the idea it could be raised to as much as 39%, saying much of the budget speculation that had emerged so far was “wide of the mark”.

Council tax

Another solution the government could reach for is reforming the council tax system so the bands are changed.

Currently council tax is set in bands that are based on the 1991 value of homes, which has been branded “absurd” by the IFS and “incredibly poorly designed” by the Institute for Government.

Former shadow minister Jonathan Ashworth told Sky News during the election campaign that Labour would not change council tax bands – but there has nevertheless been reports the government could replace the banding system in favour of a 0.5% tax on the value of a property per year.

This would mean that someone in a property worth £350,000, for example, would pay £1,750 a year.

There was also speculation that the government could scrap the 25% council tax discount for single-occupant households, but this has subsequently been ruled out.

Stamp duty

Stamp duty is paid on the cost of a property over £250,000, with more paid for second homes and by non-UK residents.

Those buying their first home are entitled to relief in order to help people get on to the housing ladder – but this is due to be cut from April next year.

Labour has confirmed the threshold for stamp duty for first-time buyers will fall back to £300,000, after it was raised to £425,000 in 2022 by Rishi Sunak.

Labour could change the tax so it is focused on annual land value tax instead of on a transaction – but that could be a hard sell with the party.

Gambling tax

A report in The Guardian recently suggested the government was considering hiking taxes on “higher harm” products such as online casino games, in a move the left-leaning Institute for Public Policy Research said could raise up to £3.4bn by 2030.

The newspaper claimed the 15% general betting duty, levied on high-street bookmakers’ profits, could be doubled, while remote gaming duty could go from 21% to 50%.

Fuel duty

In 2022 Mr Sunak cut fuel duty by 5p – until March next year.

This could be scrapped, with the RAC saying the cut costs the Treasury £2bn a year.

Fuel duty has otherwise been frozen for more than a decade.

Politics

Reform UK’s Andrea Jenkyns says Nigel Farage’s row with Rupert Lowe was ‘clearly a big falling out’ – but insists it will ‘blow over’

Published

52 mins ago

March 14, 2025

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Reform UK's Andrea Jenkyns says Nigel Farage's row with Rupert Lowe was 'clearly a big falling out' - but insists it will 'blow over'

Reform UK’s most senior woman has told Sky News the Rupert Lowe row “doesn’t look great” and she doesn’t “want to see it in the news any more days”.

Dame Andrea Jenkyns, who defected to Reform last year, accepted it was “clearly a big falling out” but suggested these spats do not always cut through to the public.

She insisted she was concentrating on winning as she looks to become the party’s first ever mayor in May.

In an interview with Sky News, Dame Andrea also spoke for the first time about her experience of domestic abuse, denying Reform has a “woman problem” but accepted “we need to start talking more about issues, what women are interested in”.

Having lost her seat as a Conservative in the 2024 election, Dame Andrea briefly quit politics only to return earlier this year as Reform’s newest recruit.

She is now standing as the party’s candidate to become the first Greater Lincolnshire mayor, in a race that psephologists think could be Reform’s best hope of turning itself from a party of protest into one that is governing.

That’s because Reform is on the march in Lincolnshire, which is a key battleground between the Conservatives and Reform in the local and mayoral elections in May.

Richard Tice, Reform’s deputy leader, took the Conservative seat of Boston and Skegness in the last election as Reform came second in a further two of the county’s eight constituencies.

This farming country has long been part of the patchwork of Conservative England and it is in these heartlands that Reform hopes it can land a significant blow to its political rivals in the coming weeks.

“It’s a worry,” admits one Labour insider who doesn’t much relish the prospect of having to deal with a newly minted Reform party mayor should Dame Andrea win in May against Labour candidate Jason Stockwood, the Conservative Rob Waltham and independent Marianne Overton.

There is also the Lincolnshire council race, which Reform is targeting. All 70 seats are up for grabs and the Conservatives, which have a 38-seat majority, are defending 53 seats. The only way is up for Reform here, while the Conservatives, who have held this council for 10 of the past 13 elections, are bracing for a drubbing.

Tories say Jenkyns is from Yorkshire

The Conservatives make the point that they have a “strong local candidate who is born and bred in Lincolnshire, whereas Dame Andrea is from Yorkshire” when I ask them about the race.

“We are fighting hard, we have a proven track record of delivery in charge of local services whereas Reform aren’t tried and tested,” the Conservatives said.

“And if they’re anything like Reform nationally, who don’t turn up on important votes, then they won’t show up for people locally.”

Dame Andrea is still based in Yorkshire where she used to be an MP, as this is where her son attends school. But she rents a place in Lincolnshire and has vowed to move to the county should she win the mayoralty.

She also points out that she grew up in Lincolnshire and was a local councillor before moving to Yorkshire after her shock victory over Ed Balls in the 2015 general election.

‘Fed up’ farmers eyeing Reform

When we meet her on the road in Lincolnshire, she takes us to meet some farmers whose livelihoods are under intense pressure – be it over local flooding and flood defences or changes to inheritance tax and farming subsidies that are affecting their farms.

There is little love for Labour in the gathering of farmers, who in the main seem to be lapsed Conservative voters that are now eyeing Reform, as a number of them tell me how they are fed up with how the Environment Agency and local politicians are running their area.

“We’re fed up with all of them,” said one farmer.

“We just want some action. As farmers we know drainage is so important, we just want to get it sorted.”

They are also alarmed and anxious about the inheritance tax changes introduced by Labour and are pressing for carve-outs for small farms handed down from generation to generation amid fears they will have to sell up to pay the inheritance tax bills.

But the troubles at the top of Reform hadn’t gone unnoticed by this group. Unprompted, one of the farmers raised the row between the suspended Reform MP Rupert Lowe and the party leadership, telling Dame Andrea that while he “really likes Reform” he doesn’t much like what he’s seeing at the moment.

‘Spat looks worse because Reform is small’

The farmer said: “I don’t follow politics avidly. But I just look and say [Rupert Lowe] is full of common sense and I really like him and I don’t know what’s happened, but it looks from outside [he has been] chucked under the bus.

“And I’m like, am I getting second thoughts about Reform? I don’t know what’s gone on, but it concerns me about what’s going on with Reform.”

Dame Andrea tries to downplay it and says the “spat” looks worse because it’s a smaller party.

“To me it’s about the movement, the right policies, to carry on. What is the alternative? This will blow over and Reform will keep getting strong,” she said.

Can Jenkyns and Farage co-exist?

Dame Andrea would clearly like the infighting to stop, but it raises questions for me about how she will fit into this very male-dominated party, in which all four MPs are male, with Dame Andrea the only senior woman beyond the former Conservative minister Ann Widdicombe.

She is, like Nigel Farage, a disrupter – Dame Andrea was one of the first Tories to call for Theresa May and Rishi Sunak to stand down, and a conviction politician who fervently backed Boris Johnson and Brexit.

If she does win this mayoral race she will be a big personality in Reform alongside Farage, which leaves me wondering if they can co-exist in a party already at war.

Jenkyns was in an abusive relationship

Reform does struggle with female voters, with fewer women voting for the party against all age cohorts, young to old. Dame Andrea tells me she doesn’t think the party has a “woman problem”, but she does think it needs to talk about more issues that she thinks women are interested in, citing education, special educational needs and mental health.

When I raise the matter of violence against women and how the party has handled revelations that one of its own MPs was jailed in a youth detention centre as a teenager for assaulting his girlfriend, Dame Andrea reveals to me she has been in an abusive relationship.

“I know how it can break you. I know how you sort of start losing your identity. So I’ve been on that side,” she said.

“And I’ve also helped constituents to fight against this, so it matters, we need to do more in society because whether it’s men or women, one is too much in my view.”

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Out on the campaign trail, even in the Labour territory of Lincoln where Hamish Falconer is the local MP, Dame Andrea gets a warm welcome. She tells me she thinks she can win it: “I might be living in blind hope here. But I’ve got that feeling.”

This corner of England has become a test bed for Reform to see if it can turn from a party of protest into one that has a shot at governing in the form of a regional mayor.

If Reform can succeed in that – what might come next? It would be a remarkable comeback for Dame Andrea and a remarkable victory for Reform too.

Politics

Labour MPs and officials briefing against work and pensions secretary should ‘shut up’, Baroness Harman says

Published

52 mins ago

March 14, 2025

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Labour MPs and officials briefing against work and pensions secretary should 'shut up', Baroness Harman says

Labour MPs and officials briefing against work and pensions secretary Liz Kendall should “shut up”, Harriet Harman has said.

The Labour peer told Beth Rigby on Sky News’ Electoral Dysfunction podcast Labour needed to “pull together” rather than descend into infighting.

Ms Kendall said on Thursday she was “determined to fix the broken benefits system” ahead of announcing “radical welfare reforms” next week.

Ministers have been priming Labour MPs and the public for cuts to a ballooning welfare bill since the start of the year.

Asked what she thought of briefings against Ms Kendall as welfare cuts loom, Baroness Harman said: “I hate those sorts of briefings.

“I don’t think anybody should be briefing against Labour ministers who are trying to implement the manifesto.

“You know, she is incredibly competent and leads a really dedicated team. So I think they should just shut up and pull together.”

More and more Labour MPs have publicly criticised the impending benefit cuts, with many concerned they will hit people with disabilities the most.

Downing Street has taken the unusual step of calling all 404 Labour MPs into Number 10 over Wednesday and Thursday for briefings on the changes ahead of the details being released next week.

Baroness Harman said she thinks Ms Kendall is a “rising star” and is “absolutely certain” the PM and chancellor will stand behind her.

The peer was social security secretary – the equivalent of Ms Kendall’s job now – at the start of Tony Blair’s first term after Labour’s 1997 landslide win.

She was forced to defend benefit cuts just after they came to power and said there are “lots of parallels between what we were trying to do then, and what the government is trying to do now”.

However, she said the difference is, in 1997 she was making the argument for welfare cuts to help single parents into work by herself, but Ms Kendall is being backed by Rachel Reeves and Sir Keir Starmer.

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Politics

Is Keir Starmer bringing back austerity?

Published

52 mins ago

March 14, 2025

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Is Keir Starmer bringing back austerity?

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Sir Keir Starmer is doubling down on his bid to reduce government waste, but is his plan a fix or just more spending spin? Beth is in Hull after hearing what the Labour leader is promising, including scrapping NHS England to “cut bureaucracy” and bringing management of the health service “back into democratic control”.

Alongside Harriet and Ruth, they also discuss Starmer potentially facing down a rebellion from his own MPs over plans to shake up benefits reform and welfare payments.

The cracks are widening for Reform UK’s internal spat. Beth speaks to Andrea Jenkyns, who left the Tories to join Reform, on the party’s latest bust-up, and Ruth and Harriet look at whether the party’s chaos is helping both Labour and the Conservatives.

Email us at electoraldysfunction@sky.uk, post on X to @BethRigby, or send a WhatsApp voice note on 07934 200 444.

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