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Labour’s budget: Rachel Reeves concedes to rich and big business
Chancellor Rachel Reeves needed to show the budget brought enough of a change—but not too much of one
Chancellor Rachel Reeves delivered Labour’s first budget in 14 years on Wednesday
Chancellor Rachel Reeves gave with one hand—and took away with the other—in the budget on Wednesday. And she made sure not to take away very much from the super-rich and big business.
Reeves spent weeks warning of “tough choices” to limit working class people’s expectations. She then gave slightly more than expected—but far from enough to break with 14 years of Tory austerity.
There was no retreat over winter fuel payments or the two-child benefit cap.
Reeves announced that the minimum wage, known as the National Living Wage, will rise by 6.7 percent from April of next year. If you’re 21 or older, you’ll get £12.21 an hour—up from £11.44. If you’re aged between 18 and 20, your hourly minimum wage rate will increase from £8.60 to £10.
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But that’s still lower than the Living Wage Foundation’s levels—which are based on “actual living costs”—of £12.60 an hour and £13.85 in London. And many trade unions rightly demand £15 an hour as housing, energy and food costs remain high.
Labour increased the carer’s allowance limit, which gives up to £81.90 per week to people who have to look after old or sick family members. Reeves announced, “Today, I can confirm that we are increasing the weekly earnings limit to the equivalent of 16 hours at the national living wage per week.
“That means a carer can now earn over £10,000 a year while receiving carer’s allowance.”
The budget boosted the NHS’s day to day spending by £22 billion over two years—a small step in the right direction.
The Nuffield Health Trust said this month that “day-to-day spending by NHS England will this year be £12.9 billion higher than in 2023-24” due to growing need. Its analysis warned that “£4.8 billion is not currently covered by NHS England or Department of Health and Social Care budgets”.
“Fully funding that without further cuts to the health department’s unprotected budgets would require a real-terms headline increase of 3.6 percent to £186.4 billion,” it said.
But the money will come with strings attached. Darren Jones, Labour’s Chief Secretary to the Treasury, said that “reform starts immediately”. “That’s not negotiable,” he emphasised to the BBC.
When Labour talks of “public service reform”, it means making public services run more like a business.
The NHS needs a sharp injection of cash—but the last thing it needs is health secretary Wes Streeting’s “reforms”. He’s already said he wants the health service to rely more on the private sector.
Reeves said Labour would increase the schools budget by £2.3 billion next year to “support” its pledge to hire thousands more teachers.
She promised a £1 billion uplift for pupils with special educational needs and disabilities (Send). But budget documents reveal that £1 billion will come from the overall £2.3 billion increase in schools spending.
Labour has front-loaded spending increases, but promises little in the future. Chris Giles of the bosses’ Financial Times newspaper points out, “There is a large spending increase in this financial year. After that spending increases and extra capital spending is small.”
This reflects that Starmer and Reeves are performing a balancing act. On the one hand, they know millions of working class people voted for Labour hoping for some change after 14 years of Tory rule.
On the other hand, they’re desperate to prove to bosses that Labour is a responsible manager of British capitalism.
So, Labour’s budget needed to show there was enough of a change—but not too much of one.
The increases in health and education spending come alongside budget cuts in other departments.
A key plank of Tory austerity—attacks on the welfare state—remains firmly in place with Labour planning to slash £3 billion. Reeves promised to do that by “reforming” the Work Capability Assessment. In practice, that means targeting disabled people who cannot work under the guise of “supporting people back to work”.
Richard Kramer, chief executive of charity Sense, said the decision to go ahead with the previous government’s reforms was “deeply disturbing for disabled people”. And he said it “risks undermining the wellbeing of disabled people” with potentially “devastating” consequences.
Many bosses are unhappy that Reeves increased their National Insurance Contributions (NICs) by 1.2 percentage points to 15 percent from April of next year.
“And we will reduce the secondary threshold—the level at which employers start paying national insurance on each employee’s salary—from £9,100 per year to £5,000,” she added. “This will raise £25 billion per year by the end of the forecast period.”
Bosses will want to make workers pay the price. Paul Johnson of the Institute for Fiscal Studies (IFS) think tank said, “This is a £25 billion tax rise, proportionally hitting harder those employing lower paid workers.
“Probably three quarters or so of the increase will flow through to lower pay.”
That’s not inevitable—but unions have to organise and strike for higher pay to stop that happening.
Keir Starmer and Reeves are desperate to prove to big business that they are no threat to their interests. That means removing—or at least not increasing—barriers to profiteering such as higher taxes on corporations.
That was obvious in the mild increase to capital gains tax (CGT), which the superrich pay on the sale of shares and property.
Reeves said she will raise the lower rate from 10 to 18 percent, while the higher rate will increase from 20 to 24 percent.
She boasted that Britain would still have “the lowest capital gains tax rate of any European G7 economy”.
To keep the rich happy, Labour has refused to equalise capital gains tax with income tax. Earned income, such as working class people’s wages, is taxed at higher rates of 20 to 45 percent.
Equalising the two would raise £16 billion a year—compared to £2.5 billion under Reeves’ plan.
Former Tory donor turned Labour supporter John Caudwell welcomed the budget. The billionaire Phones 4 U founder said, “I am a firm believer that the country needs to be run like a business, and the budget shows some signs that the Labour government has got the memo.”
Cauldwell added that he wants “a root and branch reform of the public sector” including delivering “greater efficiencies”.
Reeves declared that the Labour government’s mantra was “invest, invest, invest” to deliver economic growth.
Tax the rich: five measures that would raise billions for public services
Read More
She changed her “fiscal rules”—the criteria for the government borrowing money—to allow some more long term investments.
Labour claims that boosting growth will lead to better public services. But, as economist James Meadway has pointed out, even 2 percent extra in economic growth would only lead to a £24 billion boost for spending.
“Analysts estimate we’ll need an extra £142 billion annually by 2030 to restore public services to early 2000s levels,” he says.
Most major union leaders did not criticise the budget.
Paul Nowak, TUC union federation general secretary, gushed, “Today’s budget is a vital first step towards the growth, jobs and living standards working people desperately need.
“The chancellor was dealt a terrible hand by the Conservatives—economic chaos, falling living standards and broken public services.
“But with today’s budget she has acted decisively to deliver an economy that works for working people.”
Unison union leader Christina McAnea claimed, “Rachel Reeves has hit the reset button, erasing the Tory shambles and misery of the past.
“This authoritative budget turns the page on the horrible history of the past 14 years.”
But Labour’s strategy is causing tension with some union leaders. FBU firefighters’ union leader Matt Wrack had a much better response. “There are also significant missed opportunities,” he said. “Having the lowest corporation tax in the G7 is not something to boast about.
“It is a symptom of a broken economic model in which profits are prioritised above the needs and safety of the public.
“While a real-terms increase in day-to-day spending should ease some pressures, the government must go further and faster in rebuilding our broken public services.”
Sharon Graham, the Unite union leader, added, “The chancellor’s continued failure to ensure the super-rich pay their fair share is a misstep.
The 50 richest families in Britain are worth £500 billion. A 1 percent tax on the richest one per cent would create £25 billion.”
There is money for far more than what Labour’s offering—but the unions will have to fight for it.
Labour has pledged to scrap the Tories’ Trade Union Act 2016, which imposed undemocratic turnout thresholds in strike ballots.
That will remove one of the greatest barriers to national strikes—and should boost grassroots union members to push for action.
Chancellor Rachel Reeves gave with one hand—and took away with the other—in the budget on Wednesday. And she made sure not to take away very much from the super-rich and big business.
Reeves spent weeks warning of “tough choices” to limit working class people’s expectations. She then gave slightly more than expected—but far from enough to break with 14 years of Tory austerity.
There was no retreat over winter fuel payments or the two-child benefit cap.
Reeves announced that the minimum wage, known as the National Living Wage, will rise by 6.7 percent from April of next year. If you’re 21 or older, you’ll get £12.21 an hour—up from £11.44. If you’re aged between 18 and 20, your hourly minimum wage rate will increase from £8.60 to £10.
But that’s still lower than the Living Wage Foundation’s levels—which are based on “actual living costs”—of £12.60 an hour and £13.85 in London. And many trade unions rightly demand £15 an hour as housing, energy and food costs remain high.
Labour increased the carer’s allowance limit, which gives up to £81.90 per week to people who have to look after old or sick family members. Reeves announced, “Today, I can confirm that we are increasing the weekly earnings limit to the equivalent of 16 hours at the national living wage per week.
“That means a carer can now earn over £10,000 a year while receiving carer’s allowance.”
The budget boosted the NHS’s day to day spending by £22 billion over two years—a small step in the right direction.
The Nuffield Health Trust said this month that “day-to-day spending by NHS England will this year be £12.9 billion higher than in 2023-24” due to growing need. Its analysis warned that “£4.8 billion is not currently covered by NHS England or Department of Health and Social Care budgets”.
“Fully funding that without further cuts to the health department’s unprotected budgets would require a real-terms headline increase of 3.6 percent to £186.4 billion,” it said.
But the money will come with strings attached. Darren Jones, Labour’s Chief Secretary to the Treasury, said that “reform starts immediately”. “That’s not negotiable,” he emphasised to the BBC.
When Labour talks of “public service reform”, it means making public services run more like a business.
The NHS needs a sharp injection of cash—but the last thing it needs is health secretary Wes Streeting’s “reforms”. He’s already said he wants the health service to rely more on the private sector.
Reeves said Labour would increase the schools budget by £2.3 billion next year to “support” its pledge to hire thousands more teachers.
She promised a £1 billion uplift for pupils with special educational needs and disabilities (Send). But budget documents reveal that £1 billion will come from the overall £2.3 billion increase in schools spending.
Labour has front-loaded spending increases, but promises little in the future. Chris Giles of the bosses’ Financial Times newspaper points out, “There is a large spending increase in this financial year. After that spending increases and extra capital spending is small.”
This reflects that Starmer and Reeves are performing a balancing act. On the one hand, they know millions of working class people voted for Labour hoping for some change after 14 years of Tory rule.
On the other hand, they’re desperate to prove to bosses that Labour is a responsible manager of British capitalism.
So, Labour’s budget needed to show there was enough of a change—but not too much of one.
The increases in health and education spending come alongside budget cuts in other departments.
A key plank of Tory austerity—attacks on the welfare state—remains firmly in place with Labour planning to slash £3 billion. Reeves promised to do that by “reforming” the Work Capability Assessment. In practice, that means targeting disabled people who cannot work under the guise of “supporting people back to work”.
Richard Kramer, chief executive of charity Sense, said the decision to go ahead with the previous government’s reforms was “deeply disturbing for disabled people”. And he said it “risks undermining the wellbeing of disabled people” with potentially “devastating” consequences.
Many bosses are unhappy that Reeves increased their National Insurance Contributions (NICs) by 1.2 percentage points to 15 percent from April of next year.
“And we will reduce the secondary threshold—the level at which employers start paying national insurance on each employee’s salary—from £9,100 per year to £5,000,” she added. “This will raise £25 billion per year by the end of the forecast period.”
Bosses will want to make workers pay the price. Paul Johnson of the Institute for Fiscal Studies (IFS) think tank said, “This is a £25 billion tax rise, proportionally hitting harder those employing lower paid workers.
“Probably three quarters or so of the increase will flow through to lower pay.”
That’s not inevitable—but unions have to organise and strike for higher pay to stop that happening.
Keir Starmer and Reeves are desperate to prove to big business that they are no threat to their interests. That means removing—or at least not increasing—barriers to profiteering such as higher taxes on corporations.
That was obvious in the mild increase to capital gains tax (CGT), which the superrich pay on the sale of shares and property.
Reeves said she will raise the lower rate from 10 to 18 percent, while the higher rate will increase from 20 to 24 percent.
She boasted that Britain would still have “the lowest capital gains tax rate of any European G7 economy”.
To keep the rich happy, Labour has refused to equalise capital gains tax with income tax. Earned income, such as working class people’s wages, is taxed at higher rates of 20 to 45 percent.
Equalising the two would raise £16 billion a year—compared to £2.5 billion under Reeves’ plan.
Former Tory donor turned Labour supporter John Caudwell welcomed the budget. The billionaire Phones 4 U founder said, “I am a firm believer that the country needs to be run like a business, and the budget shows some signs that the Labour government has got the memo.”
Cauldwell added that he wants “a root and branch reform of the public sector” including delivering “greater efficiencies”.
Reeves declared that the Labour government’s mantra was “invest, invest, invest” to deliver economic growth.
Tax the rich: five measures that would raise billions for public services
Read More
She changed her “fiscal rules”—the criteria for the government borrowing money—to allow some more long term investments.
Labour claims that boosting growth will lead to better public services. But, as economist James Meadway has pointed out, even 2 percent extra in economic growth would only lead to a £24 billion boost for spending.
“Analysts estimate we’ll need an extra £142 billion annually by 2030 to restore public services to early 2000s levels,” he says.
Most major union leaders did not criticise the budget.
Paul Nowak, TUC union federation general secretary, gushed, “Today’s budget is a vital first step towards the growth, jobs and living standards working people desperately need.
“The chancellor was dealt a terrible hand by the Conservatives—economic chaos, falling living standards and broken public services.
“But with today’s budget she has acted decisively to deliver an economy that works for working people.”
Unison union leader Christina McAnea claimed, “Rachel Reeves has hit the reset button, erasing the Tory shambles and misery of the past.
“This authoritative budget turns the page on the horrible history of the past 14 years.”
But Labour’s strategy is causing tension with some union leaders. FBU firefighters’ union leader Matt Wrack had a much better response. “There are also significant missed opportunities,” he said. “Having the lowest corporation tax in the G7 is not something to boast about.
“It is a symptom of a broken economic model in which profits are prioritised above the needs and safety of the public.
“While a real-terms increase in day-to-day spending should ease some pressures, the government must go further and faster in rebuilding our broken public services.”
Sharon Graham, the Unite union leader, added, “The chancellor’s continued failure to ensure the super-rich pay their fair share is a misstep.
The 50 richest families in Britain are worth £500 billion. A 1 percent tax on the richest one per cent would create £25 billion.”
There is money for far more than what Labour’s offering—but the unions will have to fight for it.
Labour has pledged to scrap the Tories’ Trade Union Act 2016, which imposed undemocratic turnout thresholds in strike ballots.
That will remove one of the greatest barriers to national strikes—and should boost grassroots union members to push for action.
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