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What to Expect from Rachel Reeves's Big Debut

25 October 2024
| by Field Team

On Wednesday, Chancellor Rachel Reeves will deliver Labour’s first Budget in over a decade. It’s a critical moment for Keir Starmer’s fledgling administration after a bumpy first 100 days.

When the Chancellor rises to the Despatch Box at 12.30pm on Wednesday, expect among her very first words to be the “rock of economic stability”. She will claim years of unpredictability under the Tories have deterred investment and undermined business confidence.


To that end, her first confirmed announcement is a new set of fiscal rules – rules that define how much she will allow the Government to spend and borrow. Reeves will confirm the details of a Stability Rule, which would ensure daily spending by departments aligns with tax revenue. Her second will be an Investment Rule designed to keep the national debt declining in proportion to GDP – but so far she has not confirmed how she will record debt on the balance sheet or over how what time period debt needs to come down.


These rules mean two things. First, there will need to be significant tax rises to cover real term rises in day to day spending, with more still for the NHS. Second, more borrowing for capital investment in major, long-term projects – likely mostly in energy, with money also expected for HS2 to reach Euston and around £1 billion for social housing. .

Since July, Government has put a focus on accelerating the UK’s renewable energy ambitions and there has already been cash confirmed for carbon capture technology. To double down, Reeves could announce new commitments for offshore wind, solar initiatives or nuclear, positioning these as essential to the UK's energy independence and net-zero goals. Reeves’s investment approach will likely prioritise public-private partnerships to multiply the impact of public spending. At the heart of this strategy is the National Wealth Fund, with a strong focus on infrastructure improvements.


Debate over tax hikes will continue to dominate discussion.  Measures aimed at wealthier individuals and corporations, such as potential hikes in capital gains and inheritance taxes, will be what the Chancellor wants to focus on. In practice, moves to raise the National Insurance bill for businesses and a potential new extension to income tax threshold freezes will steal the limelight.


In charge of responding will be Rishi Sunak on his last outing as Leader of the Opposition. The Tory leader will accuse Reeves of pushing high taxes and high spending for ideological gain. He will highlight the risks of debt rising and high public spending while casting doubt on the feasibility of Labour’s ambitions.


For Labour, however, this Budget is much more than a policy package. It’s a moment to reassert the huge majority it won in July and demonstrate it really does have a plan for using its power over the next four years.


(Photo provided by the Guardian)

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