Rachel Reeves Budget measures mean that by 2028 weekly wages will have grown by £13 pounds over the last twenty years, an economic think-tank has said.
The Resolution Foundation has warned that the pay outlook is “dire” and many UK workers will not feel any better off by the end of this Parliament.
Mike Brewer, Interim Chief Executive of the Resolution Foundation, said: “The short-term effect of these changes will be better funded public services.
He added: “But families are also set for a further squeeze on living standards as the rise in employer National Insurance dampens wage growth.”
It comes as the IFS has warned that Ms Reeves long term spending plans are as unrealistic as the Tories.
IFS director Paul Johnson said that Ms Reeves’ current plans mean a 4.3 per cent jump in spending next year, 2.6 per cent the year after and then 1.3 per cent in each of the following years.
Mr Johnson said: “I’m afraid this looks like the same silly games playing as we got used to with the last lot. Pencil in implausibly low spending increases for the future in order to make the fiscal arithmetic balance.”
Key Points
- Rachel Reeves playing ‘same silly games’ as Tories on tax and spend, IFS warns
- Reeves admits tax rises will impact wage increases for workers
- IMF endorses Reeves tax rises and focus on investment
- How did the papers react to the Budget?
- Kirstie Allsopp accuses Rachel Reeves of breaking up farms and estates after Budget
Morning
08:46 , Joe MiddletonHello and welcome to our live blog covering the aftermath of chancellor Rachel Reeves historic Budget on Wednesday. We will be bringing you all the latest reaction from Westminster and beyond.
Taxes will have to rise further despite Reeves’ £40bn tax grab, IFS director warns
08:46 , Joe MiddletonRachel Reeves will have to raise taxes further in the coming years despite her Budget on Wednesday containing £40bn of tax increases, a top economist has warned.
The chancellor has pencilled in spending plans almost as implausible as her predecessor Jeremy Hunt, according to the head of the Institute for Fiscal Studies (IFS).
Rachel Reeves has hit back at criticism, insisting that public services in the UK “needed an immediate injection of cash” and pointed out that the International Monetary Fund (IMF) has backed her Budget.
She said: “I do own the decisions I took yesterday. They were the right ones to protect public services and the standard of living of people in this country. I had to make difficult choices but that was necessary to start to rebuild our country.”
Archie Mitchell reports
Taxes will have to rise further despite Reeves’ £40bn tax grab, IFS director warns
Reeves admits tax rises will impact wage increases for workers
08:48 , Joe MiddletonBusinesses will have to absorb the costs of paying more national insurance and this may result in smaller pay rises, Rachel Reeves has acknowledged.
Asked about the consequences of increasing national insurance contributions for employers by 1.2 percentage points to 15% from April 2025, the Chancellor told BBC Breakfast: “I said that it will have consequences.
“It will mean that businesses will have to absorb some of this through profits and it is likely to mean that wage increases might be slightly less than they otherwise would have been.
“But, overall, the Office of Budget Responsibility forecast that household incomes will increase during this Parliament.
“That is a world away from the last Parliament, which was the worst Parliament ever for living standards.”
Watch: Robert Jenrick calls Rachel Reeves a 'compulsive liar' after Budget announcement
08:49 , Joe MiddletonIMF endorses Reeves tax rises and focus on investment
08:54 , Joe MiddletonThe International Monetary Fund (IMF) endorsed the investment and spending on public services in the chancellor’s Budget, as well as sustainable tax rises.
In an unusual move, the Washington-based watchdog said: “We support the envisaged reduction in the deficit over the medium term, including by sustainably raising revenue.”
NEW
— Faisal Islam (@faisalislam) October 30, 2024
IMF back today’s UK tax-raising Budget
“welcome the budget’s focus on boosting growth
-needed increase in public investment -support the envisaged reduction in the deficit .. including by sustainably raising revenue”
Catastrophic cost of Brexit on UK trade revealed in stark OBR warning
08:57 , Joe MiddletonBrexit is on course to cut UK trade by 15 per cent, the government’s independent financial watchdog has warned.
Vote Leave campaigners argued that British trade would receive a boost from exiting the European Union in the run up to 2016’s referendum.
But in documents published alongside Rachel Reeves’ Budget the Office for Budget Responsibility (OBR) said that “weak growth in imports and exports over the medium term partly reflect the continuing impact of Brexit, which we expect to reduce the overall trade intensity of the UK economy by 15 per cent in the long term.”
The figures led to claims that Brexit was the “elephant in the chancellor’s study”.
Kate Devlin reports
Catastrophic cost of Brexit on UK trade revealed in stark OBR warning
Hunt claims Budget ‘a very sad day for ordinary families’
09:07 , Joe MiddletonShadow chancellor Jeremy Hunt said Wednesday was “a very sad day for ordinary families” and claimed Labour has broken its manifesto pledge not to raise taxes for working people.
He told Sky News: “Yesterday was a bad day for trust in British politics because 30 times this year before the election the Chancellor said she had no plans to increase tax outside what was explicitly written in the manifesto - and we had the biggest tax-raising Budget in British history.
“However much Labour tries to say that their tax rises won’t hurt ordinary families, the OBR and the Institute for Fiscal Studies say it’s going to mean lower pay, lower living standards, higher inflation, higher mortgages - so it is a very sad day for ordinary families.”
How did the papers react to the Budget?
09:20 , Joe MiddletonThe front pages this morning split broadly along party lines. The Labour-friendly Daily Mirror focused on Rachel Reeves £70bn boost to public services to help “undo 14 years of Tory neglect”.
The left-of-centre Guardian hailed “the return of tax and spend” and said Ms Reeves “had gambled” that voters would reward Labour for fixing public services.
The Daily Mail, Financial Times, Times and Metro all focused on the £40bn tax rise announced by Ms Reeves on Wednesday.
Tory-friendly Daily Express described the Budget as a “halloween horror show” and The Daily Telegraph said it was a “nightmare on Downing Street”.
The Sun highlighted Ms Reeves tax rises and highlighted her decision to freeze fuel duty - a regular focus for the Murdoch-owned paper.
Thursday's DAILY MAIL: Reeves' £40bn tax bombshell for Britain's strivers#TomorrowsPapersToday pic.twitter.com/BaOGcVVpuE
— Jack Surfleet (@jacksurfleet) October 30, 2024
Thursday's GUARDIAN: Return of tax and spend#TomorrowsPapersToday pic.twitter.com/9M8rMceJzc
— Jack Surfleet (@jacksurfleet) October 30, 2024
Thursday's SUN: At least she kept it down at the pumpkins!#TomorrowsPapersToday pic.twitter.com/OUcNKu8DQm
— Jack Surfleet (@jacksurfleet) October 30, 2024
Reeves national insurance hike ‘clearly a tax on working people’
09:25 , Archie MitchellThe chancellor’s national insurance hike is “clearly a tax on working people”, an influential think tank has said.
Mike Brewer, interim boss of the Resolution Foundation, said Rachel Reeves’ decision to increase employer national insurance contributions “will eventually feed through to lower wages”.
“This will definitely show up in wages, this is definitely a tax on working people, let’s be very clear about that,” Mr Brewer said.
Hunt claims a Tory Budget would have taken ‘harder path’ of cutting welfare
09:30 , Joe MiddletonShadow chancellor Jeremy Hunt said a Conservative budget would have taken “the harder path” by cutting the number of people on benefits.
Questioned by presenter Kay Burley on Sky News about “crumbling public services”, he said: “That’s the central issue.
“With an ageing population, with all the pressures of what (Russian president Vladimir) Putin is doing in Ukraine, how do you fund our public services without really damaging rises in taxation?”
He added that a Tory government “would have done it differently” - pointing to the cost created by the increase in people claiming benefits since the start of the Covid-19 pandemic.
“We would have made difficult decisions on welfare reform, on the public sector, and productivity,” he said.
“If you cut the number of people claiming benefits to 2019 levels - in other words before the pandemic - that releases £34 billion a year.
“The government has chosen to do nothing on that and, as a result, the adult working-age benefit bill is going to be more than £100 billion by this end of this period.
Tax calculator: See how Rachel Reeves’ Budget will affect you
09:37 , Joe MiddletonRachel Reeves has unveiled huge tax hikes of £40bn in her Budget as Labour bids to fix the nation’s finances.
Key policies include a hike in employers’ national insurance contributions, a rise in stamp duty for second homes and a freeze on fuel duty.
Capital gains tax will also rise – to 18 per cent for the lower rate and 24 for the higher – while the chancellor also unveiled a reform of inheritance tax.
After months spent warning the public of “tough choices” ahead, Ms Reeves promised to “invest, invest, invest” in order to “fix public services”
The Independent’s Budget calculator, created by tax advisory firm Blick Rothenberg, below will help you to determine whether you are better or worse off following Wednesday’s statement.
Enter a few details such as how much you earn, whether you are single, if you are in a couple or have a family to see how your finances will be affected.
Tax calculator: Check out how Labour’s Budget will affect you
‘Mixed news’ on UK workers pay packets, think-tank says
09:48 , Joe MiddletonThe Resolution Foundation has said that there is “mixed news” on UK workers pay packets after Rachel Reeves Budget announcement on Wednesday.
The higher than expected minimum wage increase next April will be a big boost for those in the 18-20 age bracket, the think-tank says.
However the wider pay situation seems bleak. The think-tank added: “By 2028 real wages are expected to have grown by just £13 a week over the past two decades.”
Mixed news on pay packets.
— Resolution Foundation (@resfoundation) October 31, 2024
Starting with the good...
The minimum wage is rising by more than expected next April - with a particularly big boost for those aged 18-20. pic.twitter.com/bjBxWfMadS
But the wider pay outlook is dire.
— Resolution Foundation (@resfoundation) October 31, 2024
Higher inflation / weaker growth from increased taxes on employment + challenging outlook = real pay stagnating again in the middle of this Parliament.
By 2028 real wages are expected to have grown by just £13 a week over the past two decades. pic.twitter.com/VJd9sFvwa6
Reeves still faces questions about public sector spending, says OBR chairman
10:07 , Joe MiddletonOffice for Budget Responsibility (OBR) chairman Richard Hughes said Rachel Reeves still faced big questions about public spending following the short-term injection of extra cash.
At a Resolution Foundation event, he said although spending was up it was “remarkable how much of that is front-loaded”.
“What’s notable is that the path of public spending then slows quite dramatically after that, back down to 1.3 per cent over the remaining years of the parliament, after next year. That’s not much above what was in the previous government spending plans, which were growing at about 1%.
“So, I think on the spending side clearly a big injection of resources into the health service and other public services over the next few years, but then still quite a lot of unanswered questions about what happens over the rest of the parliament, and in particular in light of the fact that you’ve got a spending envelope which is growing more slowly than the economy, but you’ve got a commitment to grow spending more quickly than the economy in a whole bunch of areas.”
There was “a big question about ... how they make all those numbers add up”, which would be an issue for the multi-year spending review expected next year, Mr Hughes said.
He added: “What does the future look like for future budgets for this Chancellor? She’s left herself not very much room for manoeuvre at the end of this Budget, she’s got some expensive spending commitments which I think are question marks about how they’re going to be funded when she does a full multi-year spending review for the next parliament.”
Watch: Paul Johnson warns taxes will rise in coming years despite £40bn hiking Budget
10:23 , Joe MiddletonRachel Reeves playing ‘same silly games’ as Tories on tax and spend, IFS warns
10:31 , Archie MitchellIn a damning assessment of the chancellor’s spending plans, IFS director Paul Johnson has warned Rachel Reeves is playing “the same silly games as the last lot”.
The top economist warned that Ms Reeves’ current spending plans mean a 4.3 per cent jump in spending next year, 2.6 per cent the year after and then 1.3 per cent in each of the following years.
Mr Johnson said: “It would be odd to increase spending rapidly only to start cutting back again in subsequent years.”And he added: “I’m afraid this looks like the same silly games playing as we got used to with the last lot. Pencil in implausibly low spending increases for the future in order to make the fiscal arithmetic balance.”
Mr Johnson warned that it would be “extremely challenging” to get the cabinet onboard with real terms cuts, and said he would “bet a substantial sum” that spending will increase by more than planned after next year.
It lays the ground for further tax rises in the years ahead after Ms Reeves set out the biggest tax rising Budget in history on Wednesday.
‘Last government must take responsibility for Budget challenges,’ IFS director Paul Johnson says
10:43 , Joe MiddletonPaul Johnson has said Rishi Sunak’s government must take a lot of responsibility for Wednesday’s tax-grabbing Budget.
The IFS director said the chancellor was faced with “a genuinely difficult inheritance” and responded by hiking taxes, spending and borrowing, taking the former to record levels.
But, in a warning to Rachel Reeves ahead of future Budgets and spending reviews, he added: “Worryingly for the government, and indeed all of us, the OBR has reduced its forecast of household income growth, and expects income growth over this parliament to be lower than over any other parliament in modern times – except the last parliament. Not a recipe for a happy public come the next election.”
Treasury chief secretary and Newsnight’s Victoria Derbyshire in heated Budget tax hike clash
10:51 , Joe MiddletonTreasury chief secretary Darren Jones had a heated clash with BBC Newsnight‘s Victoria Derbyshire over Labour‘s tax hikes in the Budget on Wednesday, 31 October.
The MP for Bristol North West defended Rachel Reeves’ decision to hike employer national insurance by 1.2 percentage points from April next year.
Critics warned changing the UK’s second-biggest tax will have a knock-on impact on hiring, wages and staff benefits.
When asked to be “honest” about how the trade-off of the rise will be “fewer people in work,” Mr Jones told Ms Derbyshire: “I will not take any suggestion that I’m being dishonest in my answers.”
Treasury chief secretary and Victoria Derbyshire in heated Budget tax hike clash
John Curtice: Voters are backing Reeves now – but she needs her gamble to pay off before the next election
11:20 , Joe MiddletonThe nation is more concerned about the state of the public services than they are about taxes and debt – for now. But polling expert John Curtice warns that Reeves’s – and Labour’s – future hangs on delivering what they’ve promised
Voters are backing Reeves now – but she needs her gamble to pay off
UK firms face higher employment costs, say National Institute of Economic and Social Research
11:34 , Joe MiddletonThe National Institute of Economic and Social Research has warned that businesses face higher employment costs due to Rachel Reeves Budget.
The NIESR said the rise in national minimum wage and higher employer contributions through National Insurance contributions will have a negative impact on employment in growth.
It added this would especially impact low-paid sectors such as hospitality.
Kirstie Allsopp accuses Rachel Reeves of breaking up farms and estates after Budget
11:36 , Joe MiddletonTV presenter Kirstie Allsopp has accused the chancellor of ushering in the break-up of farms and estates by imposing a new 20 per cent inheritance tax on such assets over £1m.
Farming and landowner organisations also warned the change, announced in Wednesday’s Budget, would lead to the “death of the family farm” because owners would sell up to pay the tax.
Rachel Reeves said from April 2026, the first £1m of combined business and agricultural assets would continue to attract no inheritance tax, but for assets over that sum inheritance tax would apply.
Kirstie Allsopp accuses Rachel Reeves of breaking up farms and estates after Budget
Jeremy Hunt to step down as shadow chancellor with end of Tory leadership race in sight
11:47 , Joe MiddletonJeremy Hunt has confirmed he is stepping down from the Conservative frontbench, calling for his party to be “humble” following July’s election defeat.
The decision comes just hours before the Tory leadership race comes to an end, with polls closing at 5pm on Thursday.
On Saturday morning, either Robert Jenrick or Kemi Badenoch will be crowned the new party leader.
Mr Hunt, who served as chancellor under Rishi Sunak’s Conservative government and is currently the shadow chancellor, confirmed he will be stepping back from the role following Wednesday’s budget.
Millie Cooke reports
Hunt to step down as shadow chancellor with end of Tory leadership race in sight
Pictured: Rachel Reeves visits NHS staff at UCL Hospital in London
11:55 , Joe Middleton
PM and chancellor talking to staff at University Hospitals Coventry and Warwickshire
12:04 , Joe MiddletonThe prime minister and chancellor are talking to staff at University Hospitals Coventry and Warwickshire.
Sir Keir was thanked for the extra NHS funding by Dr Amy Burridge, a consultant in acute medicine, but she asked how that income could deal with staffing gaps and burnout
Sir Keir said the first thing his government would provide was a “mindset change” from the Tories, who he said “blamed” NHS staff for problems in the service.
He said the Government would “really go much much faster on the technology that you need to take some of the weight off”.
The PM added: “Look, I’m not going to pretend that by next week it will all be fixed, because too many politicians have done that.
“It is going to take time, but what we did in the Budget yesterday is the first step, the down payment if you like, down that road, to make sure that you can do your jobs better and we can have the NHS that we need.”
NHS workload likely to go up not down, says Starmer
12:20 , Joe MiddletonThe NHS’ workload is “likely to go up, not down”, Sir Keir Starmer said, as he hinted at reforms the government might make to assist healthcare staff.
At a Q&A in the West Midlands, the PM said: “I also want to be honest with you, we are going to be asking more of you. There’s no point me standing here and saying your workload will go down.
“The whole point is people are living longer. They’ve got more conditions, what the NHS is facing now is different to what it was facing in the post-war period, your workload is likely to go up, not down.”
The Prime Minister signalled administrative change was among the reforms he was planning, including “making sure that AI and technology is your friend” to prevent duplication of records.
Rachel Reeves, meanwhile, criticised the previous government for “always raiding the capital budgets” and taking funding away from investment.
The chancellor said: “We have got to make those longer-term investments to drive those productivity and efficiency reforms as well.”
GB News fined £100,000 by Ofcom for breaking impartiality rules over Rishi Sunak interview
12:45 , Joe MiddletonGB News has been fined £100,000 by Ofcom after it was found to have broken impartiality rules in an interview with Rishi Sunak earlier this year.
The media watchdog concluded that the channel had given the then prime minister a “mostly uncontested platform” to promote the policies and performance of his government as he answered questions put to him by a studio audience and a presenter.
Ofcom began the investigation into GB News three days after the airing of a programme on February 12, titled People’s Forum: The Prime Minister.
GB News fined £100,000 for breaking impartiality rules over Rishi Sunak interview
Watch: Rachel Reeves appears to say Kemi Badneoch already Tory leader
13:00 , Joe MiddletonKeir Starmer creates new ‘Europe Hub’ as PM eyes closer ties with EU post-Brexit
13:15 , Joe MiddletonThe Home Office is creating a new “Europe Hub” as part of Sir Keir Starmer’s drive for closer ties with the European Union.
The new unit, which will sit within the International Strategy, Engagement and Devolution Directorate, will reportedly be led by Dan Hobbs, director general of the Migration and Borders Group.
Civil servants have been told the department will have responsibility for “ensuring that our strategic approach to this work is coherent, working collaboratively across the department”.
Keir Starmer creates new ‘Europe Hub’ as PM eyes closer ties with EU post-Brexit
To the less well off, Reeves giveth… from the rich, she surely taketh away
13:50 , Joe MiddletonThere was one big loser in Rachel Reeves’s historic tax-hiking Budget – the wealthy individuals who are going to have to pay for it all, says Chris Blackhurst
To the less well off, Reeves giveth… from the rich, she surely taketh away
Increasing minimum wage will make it harder for young people to get jobs, former Tory minister claims
13:57 , Joe MiddletonIncreasing the national minimum wage for young adults will make it harder for them to get jobs, a Conservative former minister has told the Commons.
Sir John Whittingdale said: “If you increase the cost of employing people, it can have only two consequences, one is lower wages and the other is fewer jobs. And in each of those cases, that is going to hit working people.
“The decision to increase the national minimum wage for young adults, a 16% increase, that will simply have a consequence that it will be even harder for those people to find jobs.”
The MP for Maldon also criticised the Government’s plans to impose VAT on private school fees, adding that parents in his constituency who send their children to private schools “are not rich, they make huge sacrifices”.
He went on to say: “The consequence is the children will need to be placed in state schools which are already under huge pressure, my constituency is growing rapidly, there is enormous pressure on schools and this is simply going to make it worse.
Meet the parents taking the government to court over VAT on private schools
14:25 , Joe MiddletonIt was the manifesto promise made a reality in the first Labour Budget for 14 years, but will a legal challenge from anxious parents force a U-turn? Zoë Beaty reports
Meet the parents taking the government to court over VAT on private schools
Labour MPs showed ‘unreality’ in reaction to Budget, says Tory MP
14:47 , Joe MiddletonLabour MPs showed “a complete lack of unreality” in their reaction to the Budget, Conservative MP Sir Bernard Jenkin has said.
Speaking in the Commons he said: “When I say that this is happening in a political bubble, it was ironic that the biggest cheer from the Labour benches yesterday seemed to be for the 1p cut in draught beer duty.
“But I have spoken to people in the hospitality industry since the Chancellor sat down yesterday, and they described this as a shattering Budget, because of course what publicans and restaurateurs will have to pay their staff and pay for their staff massively dwarfs any benefit that they could possibly hand on to their customers by a 1p duty cut.
“And in fact, most of the cost of the increases in beer that we will see as a result of this Budget are as a direct consequence of the tax increases that are being inflicted on business as a result of this Budget.
“So I’m afraid those cheers demonstrate a complete lack of unreality about the world that we’re in.”
