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Budget 2024: what the Chancellor’s statement means for Londoners

Pabio October 30, 2024

The Labor chancellor pledged to put “more euros in people’s pockets” but insisted the government must plug the £22 billion black hole in the public finances.

There was good news for London transport, with the Chancellor committing £485 million to TfL’s capital renewal program and confirming that HS2 will go to Euston.

Changes to borrowing rules will also allow him to pump billions of pounds into renovating crumbling schools and prisons and tackling NHS waiting lists.

“We will restore stability to our country again,” Ms Reeves told the House of Commons.

“The scale and gravity of the situation we have inherited cannot be underestimated.

“Together, the black hole in our public finances this year, which recurs every year, the compensation payments that (the Conservative government) has failed to fund and its failure to assess the scale of the challenges facing our services This budget increases taxes by £40 billion.

“Any chancellor here today would face this reality. And any responsible chancellor would act. This is why today, I am restoring the stability of our public finances and I am rebuilding our public services.

Ms Reeves confirmed a £25 billion raid on employers’ national insurance contributions, with higher rates and a lower starting threshold.

Businesses will be hit by a 1.2 percentage point increase in employer NI, to 15%, from April 2025.

“I know it’s a difficult choice,” the Chancellor said. “I do not take this decision lightly.”

The government will reduce the secondary threshold – the level at which employers start paying NI on each worker’s salary – from £9,100 a year to £5,000.

Businesses will also have to pay for a 6.7% minimum wage increase that will crush inflation. Businesses in the capital, where operating costs are higher, are likely to be hit hardest by these changes.

However, smaller businesses will be protected, the Chancellor said, announcing that Employment Allowance would rise from £5,000 to £10,500. This means 865,000 employers will pay no national insurance next year and more than a million will pay the same or less than before, the Chancellor said.

“This will allow a small business to employ the equivalent of four full-time workers on the National Living Wage without paying any National Insurance on their wages,” Ms Reeves added.

To give workers a boost, the government will not extend the freeze on income tax and national insurance thresholds beyond 2027/28.

The chancellor said freezing thresholds would “harm workers”.

Since 2010, workers earning more than £100,000 a year have had their personal allowance reduced, meaning that for every £2 earned above the threshold, £1 of allowance is cut.

“The previous government froze the income tax and national insurance thresholds in 2021, then did it again after the mini-budget,” the chancellor said.

“Extending the threshold freeze for a further two years would raise billions of pounds – money to address the black hole in our public finances and repair our public services.

“After looking into the matter closely, I have come to the conclusion that extending the threshold freeze would harm workers. It would take more money out of their pay slips.

“I am keeping all the tax promises I made in our manifesto, so there will be no extension of the income tax freeze and national insurance thresholds beyond the decisions of the previous government. “

Inheritance tax thresholds will be frozen for another two years, until 2030. This means the first £325,000 of any estate can be inherited tax-free, rising to £500,000 if it includes a house passed to direct descendants and £1 million when tax is imposed. The free allowance is paid to the surviving spouse or civil partner.

The non-dom tax regime will be abolished from April 2025, the Chancellor announced.

A new residency-based scheme will be introduced “for those coming to the UK on a temporary basis”.

To further encourage investment in the UK, the Government will also extend temporary repatriation relief to three years and widen its scope with measures estimated to raise £12.7 billion in the over the next five years.

Capital gains tax rates on carried interest will increase to 32% from April 2025 and from April 2026 the government will implement “further reforms to ensure that interest-specific rules postponed are simpler, fairer and better targeted,” said the Chancellor.

Real estate prices: a hard blow for first-time buyers in the capital

Hard blow for the rental housing sector: the surcharge for second homes, known as the “higher rate for additional dwellings”, will increase by 2 percentage points, to 5% from Thursday.

“This will support more than 130,000 additional transactions from people buying their first home or moving house over the next five years,” Ms Reeves said.

Stamp duty rates start at £425,000 for first-time buyers and £250,000 for everyone else. The government will drop them to £125,000 and £300,000 from April next year, which will particularly hit buyers in London and the south east, where the average house price is 688,856 £.

The Chancellor pledged to invest in housing, telling the House of Commons: “We will increase the affordable housing program to £3.1 billion, providing thousands of new homes.

“We will provide £3 billion of guarantee support to boost housing supply and support our small housebuilders. And we will invest to refurbish sites across our country, including at Liverpool Central Docks, where we will deliver 2 000 new homes, and funding to help Cambridge realize its full growth potential.”

Ms Reeves also recognized the need to increase the supply of affordable housing, saying: “I can today confirm that the Government will reduce Right to Buy discounts and local authorities will be able to keep all the revenue of any sale of social housing so that we can reinvest in the real estate stock and in a new offer.

She added: “By doing this we will provide more people with a safe, secure and affordable place to live.

“We will provide stability for social housing providers, with social housing rent settlements at CPI plus 1% for the next five years and deliver on our manifesto commitment to hire hundreds of new planning officers to enable for Britain to rebuild.

“We will also progress our commitment to accelerate the rehabilitation of homes following the findings of the Grenfell Inquiry, with an investment of £1 billion to remove dangerous cladding next year.”

London’s councils are being pushed to the brink of bankruptcy due to the costs of temporary housing and social care. The crisis has forced some town halls in the capital to request rescue loans from the government to balance their books.

Local authorities will benefit from “a significant increase in funding in real terms”, Ms Reeves said, including £1.3 billion in grants to provide essential services.

Some £230 million has been allocated to tackling homelessness and rough sleeping, which are the worst in the capital.

There will be £1 billion to expand the Household Support Fund and discretionary housing payments next year to help those facing financial hardship with the cost of basic necessities.

HS2 will go to Euston

Ross Lydall

Funds will be allocated to certain major infrastructure and growth projects. The Chancellor confirmed that HS2 will go to Euston, committing the funding needed to begin tunneling work from Old Oak Common.

The East-West Rail project between Oxford, Milton Keynes and Cambridge will continue. The first services will run between Oxford, Bletchley and Milton Keynes next year and trains between Oxford and Bedford from 2030, Ms Reeves added.

Road maintenance budgets will receive a £500 million boost next year to repair an extra million potholes a year.

Pints in London have already passed the £8 mark, while the average cost of a G&T is over £10 in inner-city areas.

But there will be some relief for owners and drinkers. Ms Reeves confirmed that alcohol duty rates on non-draught products will increase in line with the RPI from February next year. But taxes on draft alcohol will be reduced by 1.7%, meaning a penny off a pint at the pub.

This government is committed to fighting smoking and vaping. How much will a pack of cigarettes/vapes cost and what impact will this have on businesses? Will there be any further suggestions for a crackdown on smoking outside pubs, and what impact will this have on pubs, bars and restaurants?

The NHS will benefit from a record £22.6 billion increase in the daily health budget and a £3.1 billion increase in the capital budget over this year and next next.

Some £1 billion will be used to tackle the backlog of repairs and upgrades across the NHS estate.

An extra £1.5 billion will go towards new beds in hospitals across the country and new capacity for more than a million extra diagnostic tests to reduce waiting lists to 18 weeks maximum.

Carers can now earn more than £10,000 a year while receiving Carer’s Allowance, the Chancellor has announced. This will allow them “to increase their hours and keep more of their money,” she added.

There were no surprises for pensioners in the Budget after the Government committed to implementing the triple lockdown. Spending on state pensions is set to rise by more than £31 billion by 2029-30.

While working age benefits will be increased in line with the CPI, at 1.7% the basic pension and the new state pension will be increased by 4.1% in 2025-26.

“This means more than 12 million pensioners will earn up to £470 next year, £275 more than if they were increased by inflation,” the Chancellor said.

“The minimum pension credit standard guarantee will also increase by 4.1%, from around £11,400 a year to around £11,850 for a single pensioner.”

Fuel duty will be frozen, meaning there will be no higher taxes at the petrol pump next year, providing a boost to London drivers.

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