Autumn Budget 2024 - Our insights

Autumn Budget 2024 – It’s a good start, but nowhere near enough

Chancellor Rachel Reeves has delivered her first Budget Statement, and whilst it looks like a good start, there is much more that needs to be done.

She is hoping that extra funds gleaned from a hike in Employer National Insurance Contributions (NICs), combined with increases in wealth taxes, and the introduction of a new investment rule that has enabled the Government to effectively redefine public debt, are sufficient to boost the economy and keep local authorities from the abyss.

After years of underfunding of local authorities and social care services, however, there is not much cause for celebration. Whilst more funding is being made available, the need is so much greater, and the rise in Employer NICs will affect all employers, regardless of sector. Even at a time when the unemployment rate is relatively low, this tax on jobs is likely to restrict hiring and limit growth across the economy. Following the recent airing of the Employment Rights Bill, employers could be forgiven for thinking that the Government’s claims to be ‘pro-business’ are sounding a bit hollow.

On a positive note, the £500 million confirmed by the Chancellor for the affordable homes programme (AHP), supporting the delivery of 5,000 new affordable homes, is good news. However, this is just a drop in the ocean when you consider the Government’s target of building 1.5 million new homes over the course of this parliament. Importantly, the funding confirmed for the AHP is alongside a 5-year social housing rent settlement of CPI+1% and reductions in Right to Buy discounts. These proposals will benefit Local Authority Registered Providers and housing associations alike.

The biggest risk the Chancellor has taken in the Autumn Budget is the decision to introduce new fiscal rules. By redefining public debt as ‘net financial debt’, she has effectively released significant borrowing capacity into the economy. How the City and investors will view this move, is not yet clear.

With a £22 billion ‘black hole’ in the country’s finances, some may have been expecting more tax increases. While private individuals and employers are taking the biggest hit from this round of fiscal changes, they may well be feeling relieved that the tax hikes weren’t more onerous.

So, whilst this is a good start, the problems we are facing in local government, health, social care and the housing crisis mean there is so much more to do. If the financial markets are not spooked by this Halloween budget, then maybe the Government will feel more confident next time to use more of the borrowing capacity created.

Peter Hubbard
Managing partner