Budget 2024: What could Chancellor Rachel Reeves announce?

Published

3 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.

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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

Was Tusk doing Brussels’s bidding with his ‘Breturn’ plea?

Published

1 hour ago

January 18, 2025

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Was Tusk doing Brussels's bidding with his 'Breturn' plea?

When Nigel Farage’s Reform UK is just one point behind you in the opinion polls, the last thing you want to be reminded about is Brexit.

If you’re Sir Keir Starmer, that is.

No doubt Poland’s prime minister, Donald Tusk, was trying to be friendly. After all, as Sir Keir said, they share a passion for Arsenal Football Club.

But when Mr Tusk declared at their joint news conference in Warsaw that his dream was “instead of a Brexit, we will have a Breturn”, Sir Keir visibly cringed.

Was it an ambush? Not quite. But it was certainly awkward for the UK prime minister. He stood stiffly and didn’t respond, not once uttering the word “Brexit”.

Mr Tusk, however, has form for bemoaning Brexit. He was, after all, the president of the European Council when the UK voted to leave the EU in 2016.

He might now be in his second spell as Poland’s PM, but his five years at the EU make him the ultimate Brussels insider, who’s never made any attempt to hide his feelings on Brexit.

Prior to the UK referendum, in September 2015, he said Brexit “could be the beginning of the destruction of not only the EU but also of western political civilisation in its entirety”.

His most outspoken attack on the UK’s Eurosceptics came in 2019 when the-then prime minister Theresa May was struggling to get a deal. He spoke of “what the special place in hell looks like for those who promoted Brexit“.

Standing alongside Sir Keir, he revealed that “for obvious reasons” they discussed co-operation between the UK and the EU. He recalled that his emotional reaction to the referendum in 2016 was “I already miss you”.

He went on: “This is not just about emotions and sentiments – I am aware this is a dream of mine, that instead of a Brexit we will have a Breturn.

“Perhaps I’m labouring under an illusion. I’d rather be an optimist and harbour these dreams in my heart – sometimes they come true in politics.”

A dream? Or a calculated move? As a Brussels insider, was Mr Tusk speaking for the EU as a whole? Was he doing Brussels’ bidding?

He may have returned to lead his homeland, but he remains a key player in Brussels.

On becoming Poland’s PM in 2023, he ended a dispute with Brussels which unlocked billions of frozen EU funds for his country.

He also orchestrated the return of his centre-right ally Ursula von der Leyen as European Commission president.

And Poland has just taken over the rotating presidency of the EU, which means Mr Tusk will be hugely influential once again, chairing meetings and setting agendas.

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Poland is back in the European mainstream. It’s where Mr Tusk would like the UK to be as well.

It’s where, privately, Sir Keir would like the UK to be. It’s just that with Reform UK almost neck and neck with Labour in the polls, he daren’t say so.

Politics

Polish PM says he ‘dreams’ of a ‘Breturn’ as UK seeks new defence pact with ally

Published

2 hours ago

January 17, 2025

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Polish PM says he 'dreams' of a 'Breturn' as UK seeks new defence pact with ally

Poland’s prime minister has said he hopes for the “Breturn” of the UK as a member of the European Union – as he discussed a defence treaty with Sir Keir Starmer.

Donald Tusk, who was hosting the prime minister for discussions on a UK-Polish defence pact in Warsaw, said it was his “dream” that “instead of a Brexit, we will have a Breturn”.

Standing alongside Sir Keir at a joint news conference, the Polish premier also said he had discussed greater cooperation between the UK and the EU.

Mr Tusk, who was the president of the European Council during the years that Britain left the EU, said: “For obvious reasons, we also discussed another issue, the cooperation between Great Britain and the European Union.

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“I’m sure you will recall when we learned about the results of the Brexit referendum. I was head of the European Council… at that time. My first emotional reaction was to say: ‘I already miss you.’

“I remember our press briefings as if it was yesterday. I already miss you, that’s what I said.”

He added: “This is not just about emotions and sentiments – I am aware this is a dream of mine, that instead of a Brexit we will have a Breturn.

“Perhaps I’m labouring under an illusion. I’d rather be an optimist and harbour these dreams in my heart – sometimes they come true in politics.”

Sir Keir, who held the role of shadow Brexit secretary while Labour was in opposition and backed remain in the 2016 referendum, has repeatedly ruled out rejoining the customs union or single market.

He has, however, said he wants to deepen post-Brexit ties with Brussels

Mr Tusk was speaking after Sir Keir travelled to Poland to discuss a defence pact with the NATO ally – which Mr Tusk said he hoped would be ratified “this year”.

The new treaty is designed to protect Europe from Russian aggression, tackle people-smuggling gangs, and combat misinformation and cyber threats.

Sir Keir was also asked whether the UK’s attendance at a defence summit in Poland earlier this week meant he was in favour of “creating an army” for Europe – to which he replied he was not.

Asked about the E5 defence ministers meeting in Warsaw and whether he supported creating a common European army, Sir Keir said: “The meeting that happened the other day is vitally important. That isn’t about creating armies.

“It’s about how we share our security concerns and build on what we’ve already got.”

As part of the defence pact, a £4bn partnership for new air defence systems in Poland has been agreed. The project will be headquartered in Bristol.

“The UK has secured £8bn of defence deals in Poland over the last three years alone, and we’re going further today, opening a new joint programme office in Bristol to deliver our £4bn partnership, to deliver the next generation of air defence systems to Poland,” he said.

He added: “We share an unbreakable commitment to NATO and an unbreakable commitment to Ukraine.”

During his visit to Poland, Sir Keir also made his first visit to Auschwitz, which he described as “utterly harrowing”.

The prime minister visited the former Nazi concentration camp, where he laid a wreath ahead of the 80th anniversary of its liberation.

After he and his wife Victoria, who is Jewish, visited the site, Sir Keir said: “Nothing could prepare me for the sheer horror of what I have seen in this place. It is utterly harrowing.

“The mounds of hair, the shoes, the suitcases, the names and details, everything that was so meticulously kept, except for human life.”

His visit to Poland came following a surprise trip to Kyiv on Thursday, where he reiterated his support for Ukraine and suggested that British troops could be deployed to the country as part of peacekeeping efforts.

In an exclusive interview with Sky News’ political editor Beth Rigby, Sir Keir said the UK would play its “full part” in any peace negotiations – including by deploying British troops for peacekeeping – though added that he did not want “to get ahead of ourselves”.

During his visit, Sir Keir also met Polish businesses, including the firm InPost which has announced it will invest a further £600m into the UK in the next five years to grow its operations.

It is thought that the overall £1bn investment by the firm, which operates parcel lockers, could support up to 12,000 new jobs.