Autumn Budget 2024 Overview

Chancellor Rachel Reeves will deliver the new government’s first Budget on 30 October 2024. This Budget will focus on economic growth and investment, with goals to enhance public finances, spending, and tax policies.

Key Economic Highlights

  1. Growth Rebound:

    • After a slowdown in 2023, GDP grew in early 2024, driven by the business sector. Modest growth of around 1% is expected for 2025.

    • Inflation has cooled to 1.7%, easing pressures on households, while wages are growing faster than inflation.

  2. Interest Rates:

    • Bank of England has started reducing rates, currently at 5%. Further cuts are expected, which may encourage household spending.

  3. Labour Market:

    • Unemployment remains low at 4%, while job vacancies are back to pre-pandemic levels. However, economic inactivity due to illness is a growing issue, impacting workforce availability.

Public Finances and Fiscal Strategy

  1. Government Borrowing and Debt:

    • Borrowing is about 4.4% of GDP, while public debt is at 99% of GDP. Borrowing is expected to fall gradually over the next five years.

    • Fiscal rules aim for a balanced budget and reduced debt-to-GDP ratio, which may limit borrowing flexibility.

  2. Spending and Investment:

    • Investment Focus: The government prioritises “investment-led growth” through infrastructure projects and collaboration with the private sector. A National Wealth Fund will replace the UK Infrastructure Bank, with a broader mandate to stimulate long-term economic gains.

  3. Spending Constraints:

    • Current plans impose tight spending limits across departments, with real-term reductions possible in certain areas.

Taxation Insights

  1. Labour’s Tax Strategy:

    • The government has pledged not to raise the main taxes affecting working people. However, they may target tax loopholes or introduce wealth-related taxes to raise revenue.

  2. Potential Reforms:

    • The Budget may introduce changes aimed at improving tax fairness and efficiency while limiting economic disruptions.

Outlook and Implications

  1. Economic Growth Goals:

    • The government’s primary mission is to “kickstart economic growth” to achieve the highest sustained growth in the G7.

  2. Long-term Productivity:

    • With low productivity growth since the 2008 financial crisis, increasing output per worker is essential for economic resilience. Technological advancements like AI could aid growth, though challenges remain.