Invest, Invest, Invest says Rachel Reeves Announcing 2024 Budget

THE CHANCELLOR of the Exchequer, Rachel Reeves, launched her first budget saying she will rebuild Britain with a decade long plan to invest and grow the economy.

She says CPI inflation will stabilise at 2.6% next year with reductions in the following years of 2.3% in 2026, 2.1% in 2027, 2.1% in 2028 and 2.0% in 2029.

The OBR forecasts growth of 1.1% this year, 2% in 2025 and 1.5% in 2027, 1.5% in 2028 and 1.6% in 2029.

Cuts of 2% apply to all government departments, but the Chancellor said there will be no return to austerity.

For devolved governments there will be £3.4bn for the Scottish government, £1.7bn to the Welsh government, and £1.5bn to the Northern Ireland executive in 2025-26.

Taxes will rise by £40bn in total this year.

New Funding Measures

Industrial Strategy

Announcing plans for investment, the Chancellor said the national wealth fund will invest in “industries of the future”.

A “modern industrial strategy” will invest £1bn for the aerospace sector, over £2bn for the automotive sector and up to £520m for a new Life Sciences Innovative Manufacturing fund.

A new, multi-year investment into carbon capture and storage will provide funding for 11 new green hydrogen projects across England, Scotland and Wales.

These commercial-scale projects will be established in several communities, including Bridgend, East Renfrewshire and Barrow-in-Furness.

Housing

Funding of £1bn will be available to accelerate the removal of dangerous cladding on homes, following the Grenfell Tower report.

The government will reduce Right to Buy Discounts. Local authorities will retain receipts from the sale of any social housing so that it can be reinvested into their existing stock and new supply.

Warm Home Plan

Funding for retrofits of energy inefficient housing will be £3.4bn this year.

Transport Funding

Announcing the delivery of the Trans-Pennine upgrade to connect York, Leeds, Huddersfield and Manchester, the Chancellor committed to “delivering fully electric local and regional services between Manchester and Stalybridge by the end of this year”.

She also says the government will deliver East-West Rail to drive growth between Oxford, Milton Keynes and Cambridge.

On HS2 – the high speed rail project – Reeves says they are committing the funding to begin tunnelling work to London Euston, meaning Old Oak Common in West London and Euston.

It was one of the sections of the multi-billion pound rail project that had been scrapped by the Conservative government.

Without the link to Euston, people travelling between Birmingham and London would arrive at Old Oak Common and have to take another train to travel into the centre of the capital.

£500m increase for road maintenance next year to deliver on the commitment to fix an additional one million potholes each year.

The single bus fare cap applied to many routes in England will be raised from £2 to £3

NHS

There will be a £22.6bn increase in the day-to-day health budget, and a £31bn increase in the capital budget. One billion is allocated for health capital spending and £7m funding for hospitals affected by RAAC.

Schools

For schools, an additional £6.7bn will go to the Department for Education next year, – a 19% real-terms increase on this year. It includes over £1.4bn to rebuild 500 schools, and £2.1bn more for school maintenance, an increase of £300m on this year.

Tax Changes

National Insurance

The Employer’s National Insurance rate will increase from 13.8% to 15%. At the same time, the National Insurance threshold after which businesses will pay the tax will reduce from £9,100 a year to £5,000 of employee’s earnings per year. The move will raise £25bn, the Chancellor said.

However, the Employment Allowance will rise for workers earning £5,000 to £10,500 per year, meaning employers won’t pay any National Insurance for 865,000 workers.

Tax fraud will be targeted to raise £6.5bn over the parliamentary term.

Income Tax

There will be no extension of the freeze in income tax thresholds beyond 2028-29 set by the Conservative government previously. In 2029-2030 personal tax thresholds will be uprated in line with inflation.

Capital Gains Tax

Capital gains tax (CGT) charged on profits made from selling assets such as a second home or investments, including shares is to rise.

The lower rate of Capital Gains Tax will rise from 10% to 18%, and the higher rate from 20% to 24%.

The rates on residential property will remain at 18% and 24%. Reeves says she will increase Capital Gains Tax rates on carried interest to 32% from April 2025 and, from April 2026.

Business Rates

The current 75% discount to business rates – due to expire in April 2025 – will be replaced by a discount of 40% – up to a maximum discount of £110k.

It still means that many businesses will see their business rates nearly double.

Small business tax relief rate remains frozen next year.

VAT on Private School fees

Private schools will no longer receive small business relief from April 2025 and parents will start to pay VAT on fees from January 2025 raising £9bn.

Non-Dom Tax

The non-dom tax regime will be abolished as an “outdated concept” from April 2025.

This applies to a UK resident whose permanent home – or domicile – for tax purposes is outside the UK. A new, residence-based scheme with “internationally competitive arrangements” for those coming to the UK will be imposed on a temporary basis.

The Office for Budget Responsibility say that this will raise £12.7bn over the next 5 years.

Inheritance Tax

Inheritance Tax thresholds will remain at £325,000 for a further 2 years, rising to £500,000 if the estate includes a residence passed to direct descendants, and £1m when a tax free allowance is passed to a surviving spouse or civil partner.

Inherited pensions will be brought into inheritance tax from April 2027 and reforms Agricultural Property Relief and Business Property Relief will see, from April 2026, the first £1m of combined business and agricultural assets continuing to attract no inheritance tax at all. For assets over £1m, inheritance tax will apply with 50% relief, at an effective rate of 20%.

Fuel Duty

The Budget will maintain existing incentives for EVs in company car tax from 2028. It will also increase the differential between fully electric and other vehicles in the first rates of Vehicle Excise Duty beginning in April 2025.

Tobacco Duty

A 10% increase on tobacco duty was announced for hand-rolled tobacco this year, and a flat-rate duty on all vaping liquid from 2026, as well as a one off increase in tobacco duty to maintain the incentive for smokers to give up smoking.

Stamp Duty

A 5% rise in stamp duty on second homes will come into effect immediately.

Air Passenger Duty

Air passenger duty will increase by no more than £2 for an economy-class short haul flight. On private jets, air passenger duty will rise by a further 50% – equivalent to £450 per passenger for a private jet.

National Minimum Wage

Over 3 million workers will receive an increased National Living Wage going up from £11.44 to £12.21 an hour from April 2025.

The 6.7% increase is worth £1,400 a year for an eligible full-time worker.

For 18 to 20-year-olds the rate will rise from £8.60 to £10.00 an hour – the largest increase in the rate on record. This will mean a pay boost of £2,500 full-time for younger workers next year. This marks the first step towards aligning the National Minimum Wage and National Living Wage to create a single adult wage rate over time.

Apprentices see their minimum hourly pay increase by 18.0%, a pay bump from £6.40 to £7.55 an hour.

These increases will mean 3.5 million workers will receive a pay rise this year in total.

Carer’s Allowance

Carer’s Allowance Rises to £81.90 per week and will allow carers to earn £10,000 each year before any of the Carer’s Allowance is deducted.

The rate at which debt is recovered from benefit recipients will be reduced from a rate of 25% to 15% per year.

INDUSTRY COMMENT

Hope for Refurbishment in Education

Billions has been promised to rebuild and maintain hundreds of UK schools in today’s Budget. Rachel Reeves, has pledged £1.4 bn to rebuild more than 500 schools, as well as £2.1 bn for school maintenance. This is a 19% increase in the Department for Education’s capital budget.

“This much-needed investment is vital to help those schools impacted by Reinforced Autoclaved Aerated Concrete (RAAC),” comments Sarah Spink, Chief Executive of the Liquid Roofing and Waterproofing Association (LRWA).

“It will have a direct and hopefully positive impact on the roofing sector, and in particular, liquid applied waterproofing membranes as they are often specified in education refurbishment.

“Our job now in the roofing sector is to continue to help educate and inform specifiers of the benefits of liquid applied membranes as the UK government tackles the RAAC crisis. A secure roof over our children’s heads is not just a structural necessity, but a foundational element for their education and future.”

Shift to Sustainable Construction

Rachel Hughes, Marketing Director at Wienerberger UK, said: “The Labour government’s Autumn Budget sets the stage for a shift towards sustainable construction in the UK. Focusing on decarbonisation, it outlines a roadmap addressing environmental concerns and opening new avenues for innovation and growth in construction.”

Social Housing

“The announcement of additional funding for the Affordable Homes Programme underscores the UK government’s dedication to addressing the profound housing crisis. This commitment, part of a broader strategy to invest over £5 billion in housing supply, is poised to deliver up to 33,000 new homes nationwide. Crucially, the initiative targets the creation of 5,000 additional affordable social homes.

“The introduction of a five-year social housing rent settlement further enhances the sector by providing financial stability and promoting long-term planning. The reduction in Right to Buy discounts also aims to preserve existing council housing stocks. This multi-faceted approach… Wienerberger supports.”

Major Headache

Brian Berry, Chief Executive of the FMB, said: “The Chancellor of the Exchequer delivered a mixed Budget with promising plans for the long-term future of the construction industry, however it is likely to present substantial challenges to firms managing their business finances. At a time when SME builders are needing a boost, they may, like many in the country, have to take a hit before they see things get better.

“The Chancellor’s decision to significantly increase employers’ National Insurance contributions will create major headaches for firms looking to take on staff at a time when the building industry in desperate need of new workers. However, it is good that the Chancellor has shielded small companies by increasing Employment Allowance, as is the rise in the Apprenticeship wage which will help increase the appeal of a career in construction for young people. Capital Gains increases may also hit builders looking to sell off their companies when they look to retire.

“The announcement of £3.2bn to fund the Warm Homes Plan will be crucial to getting more SME building companies to enter the retrofit market. The announcement of additional support for SME house builders to access low-cost loans is also welcome, and alongside the announcements on housebuilding made in recent months, offers hope for the future.”

Strong Worker Pipeline Needed

Tim Balcon, Chief Executive of the Construction Industry Training Board (CITB) responded to the Budget: “The Government’s continued support for the construction industry through increased investment in the Affordable Homes Programme and the commitment to infrastructure delivery is welcome.

“Our research shows that under the Government’s homebuilding plans, up to an additional 152,000 workers will need to be found, and this doesn’t include the quarter of a million additional construction workers we need to meet all forecasted construction demand through to 2028.

“A strong pipeline of apprentices and construction workers is required to build the millions of homes we need, and key to achieving the Government’s ambitions is to get the right skills policies in place.”

Missed Opportunity

Dr David Crosthwaite, chief economist at BCIS, said: “Reeves announced £100 billion in capital spending over the next five-years with the mantra “invest, invest, invest” but I’m not convinced this is a budget for growth. There are conflicting announcements, and as it stands the investment outlined in the Budget is unlikely to make a material difference to the construction sector and “get Britain building again” – a stated aim of the Government. We really need the Government to invest in fixed capital programmes that will actually “get Britain building again” and drive wider economic growth. Four months in and this feels like a missed opportunity for the new Government.

“The Government did announce spending on construction projects, such as schools, social housing and transport to name a few. However, it still remains unclear how the Government intends to meet its self-imposed target of building 1.5 million homes over the life of the Parliament, without tackling the existing skills shortage.

“The resurrection of the HS2 link from Old Oak Common to Euston is a positive move, but we need more commitment to other infrastructure projects in the pipeline with the Lower Thames Crossing project a prime example.”

Construction Left Out

Richard Steer, Gleeds Chair said, “Our sector is one of the largest employers’, and hikes in Nat Insurance and increases in Labour costs are going to dampen the appetite for recruitment in an industry that already needs to employ just under 251,500 workers by 2028 to just stand still.

“Funding for bringing HS2 to London was sensible and I wait to see details on refurb plans for the Schools, Roads and Health. But the budget did little to persuade me that they treat our challenges on training, retention, planning reform and meeting net zero targets with any more seriousness than the last government. Finally it is worth noting that Aerospace and Car manufacturing sectors were supported with funding by the Chancellor. Construction has a greater impact on the economy than both these sectors combined.”

Hot Air for Construction

Tom Allen, Managing Director at Signature London, said: “For the first Labour budget in 14 years, we see nothing but hot air for the construction industry. First construction’s omission in Labour’s new industrial strategy and now a series of measures that either ignore construction entirely or potentially suffocate firms already treading water in our sector. How can we get Britain building again without the construction industry?

“Investment and innovation in infrastructure is essential to build the strong economy the Chancellor has committed to delivering. Yet, a rise in ENIC is fundamentally a tax on growth for construction and these measures fail to recognise the impact it will have on cash flow particularly for medium sized businesses. From higher staffing costs and impacts on profit margins to broader pressure on budget planning and investment. The Chancellor may say that the hike will raise an extra £25bn per year to deliver strength and stability, but if half the firms that would benefit from an improved economy have been forced to downsize or shut down, what’s the point?”

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