The budget will increase taxes by £40bn, with the lion’s share coming from a £25bn rise in employers’ national insurance contributions, the chancellor announced at the budget.
Rachel Reeves said the amount businesses will pay on their employees’ national insurance contributions will increase from 13.8% to 15% from April 2025, with the current £9,100 annual threshold lowered to £5,000, in what she called a “difficult choice” to make.
The Office for Budget Responsibility (OBR), which monitors the government’s spending plans and performance, said most of the burden from the increase will be passed on to workers through lower wages, and consumers through higher prices.
It estimated the national insurance hike would reduce the average hours worked by the equivalent of 50,000 hours.
The £40bn rise in taxes is thought to be the largest increase at a budget since John Major’s government in 1993 and is set to more than fill the £22bn “black hole” Labour said the Conservative government left them with.
Ms Reeves also announced the current freeze on income tax thresholds will end in 2028/29 and will be uprated in line with inflation after that.
The previous Conservative government froze the thresholds which meant more people paying higher rates of tax as their salary increases and they move into higher tax bands.
The OBR said the tax burden will reach “a historic high of 38% of GDP by 2029/30” and predicted inflation and interest rates will both be higher as a result of the budget.
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Ms Reeves said a “line-by-line breakdown” of the black hole will be published, which she said shows there were “hundreds of unfunded pressures on the public finances” under the Conservatives.
The chancellor, who said she was “deeply proud” to be the country’s first female chancellor, insisted the Labour government would “invest, invest, invest” and put “more pounds in people’s pockets”.
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‘This budget raises taxes by £40bn’
Some of the other major changes the chancellor also announced include:
• Fuel duty will stay frozen next year and 5p cut to remain
• Capital gains tax lower rate will increase from 10% to 18%, higher rate from 20% to 24%
• Residential property capital gains tax will remain at 18% and 24%
• Two “permanently lower” business tax rates for retail, hospitality and leisure properties
• 40% relief on business rates in 2025-26 up to a £110,000 cap
• Inheritance tax thresholds frozen until 2030
• Higher rate stamp duty for second homes increased to 5% from Thursday
• Alcohol duty rates on non-draught drinks to increase in line with RPI from February
• Draught alcohol duty cut by 1.7% – 1p off a pint
• HS2 will go to Euston in central London
• Every government department must make 2% cuts by next year
• £22.6bn extra for the NHS’ day-to-day health budget, £3.1bn more for the capital budget
• £2.3bn for schools to hire teachers next year, £6.7bn for the schools capital budget
• £2.9bn for Armed Forces next year
• £500m increase in road budgets next year.
Image: Rachel Reeves and her Treasury team before the budget. Pic: Reuters
The chancellor started her budget speech by saying the country “voted for change” and “responsible leadership” on 4 July at the general election – and went on to attack the “irresponsibility” of the previous Conservative government.
“We must restore economic stability and turn the page on the last 14 years,” she said.
Ms Reeves added: “The party opposite failed our country. Their austerity broke our National Health Service. The British people have inherited their failure.”
“They called an election to avoid making difficult choices,” she continued.
The chancellor outlined her priorities as economic growth and the NHS, and pledged an end to “short-termism”.
Labour promised to keep the triple lock on pensions, where the state pension goes up each year by whichever is higher of 2%, inflation or earnings growth.
She said that means it will be uprated by 4.1% next year so more than 12m pensioners will be up to £470 better off.
She also set aside £11.8bn for compensation for victims of the infected blood scandal, and £1.8bn for victims of the Post Office IT scandal.
Ahead of the first Labour budget since Alistair Darling’s in 2010, Labour committed in its election manifesto to not increase income tax, national insurance or VAT on “working people”, which Ms Reeves said she had kept to.
Various ministers got into a tangle over who exactly qualified as a working person in the weeks before the budget.
Image: Pic: Reuters
A few plans were leaked or announced ahead of the budget, including:
• All private school fees will include VAT from January, business tax relief to be removed from private schools in April
• An increase on employers’ national insurance – but they did not say by how much
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The UK lacks a national plan to defend itself from attack and is moving at a “glacial” pace to fix the problem despite threats from Russia and China, a report by MPs has warned.
With the whole country needing to understand what it means to be ready for war, the Defence Select Committee also said it had seen no sign of a promised “national conversation on defence and security” that was launched by Sir Keir Starmer in June.
Sky News and other journalists were even blocked on Monday from interviewing sailors aboard HMS Prince of Wales, the Royal Navy’s flagship aircraft carrier, in direct contrast to the prime minister’s stated aim of greater engagement.
Image: Royal Navy aircraft carrier HMS Prince of Wales. File pic: AP
Public needs to know ‘what to expect’ from war
“We have repeatedly heard concerns about the UK’s ability to defend itself from attack,” said Labour MP Tan Dhesi, chair of the committee.
“Government must be willing to grasp the nettle and prioritise homeland defence and resilience.
“In achieving this, government cannot shy away from direct engagement with the public.
“Wars aren’t won just by generals, but by the whole of the population getting behind the Armed Forces and playing our part.
“There needs to be a co-ordinated effort to communicate with the public on the level of threat we face and what to expect in the event of conflict.”
Image: The Royal Navy tracked a Russian submarine in UK waters last month. Pic: Royal Navy/MOD
‘The Wargame’ made real?
The findings of the report support a podcast series by Sky News and Tortoise Media called The Wargame – released in June.
It simulated a Russian attack on the UK and played out what the impact might be for the country in the absence of a credible, resourced and rehearsed national defence plan – something Britain maintained rigorously during the Cold War.
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Flagship aircraft carrier to be placed under NATO command
Report’s assessment of war-readiness
The Defence Select Committee report – based on a nearly year-long inquiry – found: “The UK lacks a plan for defending the homeland and overseas territories with little progress on the Home Defence Programme.”
It said this meant the government was failing to meet a fundamental commitment to the NATO alliance – the Article 3 requirement to maintain the “capacity to resist armed attack”.
The report quoted Luke Pollard, a defence minister, acknowledging that “we have been very clear that we are not satisfied with Article 3 in the UK”.
Image: Britain’s new Ajax fighting vehicle, which arrived overdue and at great financial cost. Pic: PA
Yet the MPs’ report added: “Despite this recognition from government… measures to remediate seem to be moving at a glacial pace.”
It said: “Cross-government working on homeland defence and resilience is nowhere near where it needs to be. The government has said repeatedly that we are in an era of new threat, yet decision-making is slow and opaque.”
The rebuke from the MPs was published as John Healey, the defence secretary, prepares to announce that 13 sites across the UK have been identified as possible locations for at least six new weapons factories.
“This is a new era of threat,” he will say at a speech in Westminster later.
“We are making defence an engine for growth, unambiguously backing British jobs and British skills as we make the UK better ready to fight and better able to deter future conflicts.
“This is the path that delivers national and economic security.”
Industry will be invited to submit proposals to produce ammunition and explosives, with the Ministry of Defence saying it hopes work on the first factory will begin next year.
Ultra-processed foods (UPFs) are a leading cause of a “chronic disease pandemic” linked to worsening diets, experts have warned.
UPFs include items such as processed meats, some ready meals and cereals, ice cream, crisps, biscuits, mass-produced bread and fizzy drinks.
They often contain a high level of saturated fat, salt and sugar – as well as additives such as sweeteners and preservatives.
UPFs leave less room for more nutritious foods and are also believed to negatively affect gut health.
Forty-three scientists and researchers have now sounded the alarm and accused food companies of putting “profitability above all else”.
Writing in The Lancet, they said the firms’ economic and political power is growing and “the global public health response is still nascent, akin to where the tobacco control movement was decades ago”.
They warned that while some countries have brought in controls on UPFs, policy is lagging due to “co-ordinated efforts of the industry to skew decision-making, frame policy debates in their interest, and manufacture the appearance of scientific doubt”.
Professor Chris Van Tulleken, from University College London, one of the authors, said obesity and diet-related disease had increased in line with a “three-decade history of reformulation by the food industry”.
“This is not a product level discussion. The entire diet is being ultra-processed,” he warned.
However, several experts not involved with the article urged more research, cautioning that existing studies had shown a link with poor health and UPFs but not established causation.
Kate Halliwell, chief scientific officer at the Food and Drink Federation (FDF), which represents the industry, said companies had made a “series of changes over many years to make the food and drink we all buy healthier, in line with government guidelines”.
She said FDF-member products now contained a third less salt and sugar and a quarter fewer calories than in 2015.
A 2023 meta analysis in the PubMed journal said evidence suggested an association between UPF intake “and the risk of overall and several cancers, including colorectal, breast and pancreatic cancer”.
Get cancer symptoms checked, charity urges
It comes as Cancer Research UK warned too many Britons are putting off getting potential symptoms checked.
A poll for the charity suggested the top reasons people delay getting potential signs of cancer checked is because of a lack of GP appointments, or thinking their symptoms might not be serious.
More than half (53%) of the 6,844 surveyed said they were put off as they believed getting seen would be difficult, while 47% said they actually had found it difficult to get an appointment.
Some 44% put it off as they though the symptom wasn’t serious, 41% believed they could manage things themselves, and 40% didn’t want to be seen as making a fuss.
Cancer Research UK said it had now trained Tesco pharmacists to spot possible cancer signs – and that people can speak to them in private if they needed.
The pharmacists will be able to give advice on next steps and whether a GP appointment is recommended.
Scotland secured a place at the men’s World Cup for the first time since 1998 as stoppage-time goals by Kieran Tierney and Kenny McLean secured a thrilling 4-2 win over Denmark at Hampden Park.
Scott McTominay’s spectacular third-minute bicycle kick had given the hosts a half-time lead.
Rasmus Hojlund equalised for the Danes in the 57th minute shortly before Rasmus Kristensen was sent off, but Lawrence Shankland restored Scotland’s advantage.
When Patrick Dorgu brought Denmark level again with nine minutes remaining, it seemed they would claim the point needed to top the group and book their place at next year’s tournament in the US, Canada, and Mexico.
However, Tierney fired an unstoppable shot past Kasper Schmeichel in the third minute of stoppage time
And then, with the Denmark goalkeeper up in attack at the other end of the pitch, McLean hit a long-range effort from his own half to spark delirious scenes.
Image: Scotland’s Kenny McLean celebrates scoring his side’s fourth goal against Denmark. Pic: PA
He told the BBC: “We certainly put the country through it, but I’m sure it will be worth it.”
“I couldn’t get my mate Diogo Jota out of my head today,” he added. We spoke so much together about the World Cup. When he missed out in Qatar through injury and I missed out when Scotland never went.
“We always discussed what it would be like going to this World Cup. I know he’ll be somewhere smiling over me tonight.”
The draw for the 2026 World Cup will take place in Washington on 5 December.