Budget 2024 – latest: Inflation falls to lowest rate in three years, Reeves ‘eyes £40bn’ in cuts and spending

Rachel Reeves will announce Labour’s first Budget in 15 years later this month, leading one of the most highly-anticipated fiscal events in over a decade.

As the chancellor looks to fill the £22bn “black hole” in public spending she announced in late July, speculation has mounted about what measures will be included on 30 October.

During the Labour’s first few months in power, ministers have warned that “tough decisions” will be required to balance the books. Prime minister Sir Keir Starmer has said the event is going to be “painful” but that there is “no other choice given the situation that we’re in”.

This likely means tax rises and spending cuts can be expected. The government has already come under fire for its decision to cut back winter fuel payments for millions of pensions, sparking a row which has hung over its first 100 days in power.

In the run-up to the Budget, inflation fell below the 2 per cent target for the first time in three years, sparking hopes of an interest rate cut to come in November.

We’ll be bringing you all the latest updates ahead of the big event on 30 October here, on The Independent’s liveblog.

Key points

• Inflation falls below 2% target for first time in three years

• Budget 2024: Proposed national insurance hike sparks row

• Preview: What will be in Labour’s Budget?

• Ex-Bank of England chief urges Reeves to raise national insurance

Pinned: Inflation falls below 2% target for first time in three years

08:02 , Albert Toth

UK inflation has decreased to below the 2 per cent target for the first time in over three years.

The consumer price index (CPI) has dropped to 1.7 per cent, down from 2.2. per cent in August, according to the Office for National Statistics.

The figure has beaten expert predictions, which largely estimated a more modest drop to 1.9 per cent.

Inflation falls below 2% target for first time in three years

ICYMI: Reeves warned national insurance hike would be ‘straightforward breach’ of manifesto

08:00 , Albert Toth

Rachel Reeves has been warned that hiking employer national insurance contributions would be “a straightforward breach” of the Labour manifesto.

The chancellor has been told by Paul Johnson, director of the influential Institute for Fiscal Studies (IFS), that the party said “very clearly” it would not make the change.

Reeves warned over ‘straightforward breach’ of manifesto if national insurance hiked

Budget rumours: Inheritance Tax reform

06:00 , Albert Toth

Inheritance tax is a levy on the estate of someone who has died. This is their property, money and possessions. Crucially, it is not paid if the value of these things is below £325,000.

The tax rate is 40 per cent, but it’s only charged on the part of the estate that’s above the threshold. In 2023/24, only 5 per cent of deaths generated an inheritance tax bill, raising around £7 billion.

However, the IFS writes that the tax measure “is littered with special exemptions”. These include a business relief, the ability to pass on agricultural land tax-free, and the tax-free passing on of pension pots.

The economic think tank says that ending these measures alone would raise £4.8bn a year by 2029.

Tell us what you’d like to see announced in Labour’s first budget

03:00 , The Independent

We would like to hear your thoughts on what you would like to see introduced in Reeves’ Budget. Should she focus on measures to support homeowners, such as the Freedom to Buy scheme? Or would you prefer a focus on closing tax loopholes, such as abolishing non-dom status, to ensure a fairer tax system?

Share your views:

Tell us what you’d like to see announced in Labour’s first budget

Budget rumours: Taxing pension savings

Wednesday 16 October 2024 00:01 , Albert Toth

Pension tax relief is a reduction of the amount of tax paid on private pensions. It helps workers save for retirement by boosting their pension pots.

The amount of tax relief a person is granted is based on their income tax. It will effectively cancel out tax on pension contributions up to a maximum of £60,000.

After this, contributions will be taxed at either 20, 40, or 45 per cent, depending on which income tax rate the worker falls into.

However, the chancellor is thought to be considering a flat 30 per cent pension tax relief rate. This would mean that higher earners would effectively pay 10 per cent in tax, while those on the additional rate would pay 15.

The measure would raise around £3 billion a year, with 7 million earners paying more tax. But it would be better news for basic rate earners, who would actually begin to receive a 10 per cent boost to their pension contributions.

Evaluating the idea last year, the IFS said it would “redistribute the burden of taxation from the bottom 80 per cent to the top 20 per cent of earners.”

Budget rumours: Capital Gains reform

Tuesday 15 October 2024 22:00 , Albert Toth

It has been reported that Rachel Reeves is considering tweaking Capital Gains Tax at the 2024 Budget.

Capital Gains Tax (CGT) is paid on the profit made when an asset which has increased in value is sold. It is applied to things like the sale of personal possessions worth more than £6,000 (apart from a car), property that’s not the seller’s main home, shares and business assets.

It is charged at 10 or 18 percent for basic rate taxpayers, and 20 or 24 for higher or additional rate earners. There is a tax-free allowance of £3,000.

There are several ways CGT could be changed. In the run-up to the election, the Lib Dems and Greens both said they would rethink the tax bands to be more similar to income tax, raising an estimated £5.2bn a year.

Ex-Bank of England chief Mervyn King urges Rachel Reeves to raise national insurance in Budget

Tuesday 15 October 2024 20:00 , David Maddox

Exclusive: Former Bank of England governor Mervyn King has made a dramatic intervention warning Rachel Reeves that she must raise national insurance in her Budget on 30 October.

The Independent’s political editor David Maddox reports:

Ex-Bank of England chief urges Rachel Reeves to raise national insurance in Budget

Preview: What will be in Labour’s Budget?

Tuesday 15 October 2024 18:00 , Albert Toth

Changes to capital gains, inheritance tax, pension savings and more – here’s your guide to what the Labour Budget on 30 October could have in store:

Budget 2024 preview: What Reeves could do in Labour statement amid tax rise talk

Analysis: Reeves will need lawyer's language to break national insurance pledge

Tuesday 15 October 2024 16:00 , David Maddox

During the election Labour made a clear promise “not to raise taxes on working people”. This specifically included income tax, VAT and national insurance contributions.

The problem Rachel Reeves has as her first Budget approaches on 30 October is that somehow she has to pay for an estimated £25bn in spending commitments and encourage economic growth with little room for manoeuvre.

Her former Bank of England mentor Lord Mervyn King has warned her against extra borrowing even by rewriting the fiscals and suggested she raises national insurance instead to invest.

It is clear from the prime minister’s words this morning that national insurance rises on employer contributions is now a strong possibility. But does this mean a breach in the manifesto promises from just over 100 days ago?

The Tories say yes - they would - but so does the independent Institute for Fiscal Studies director Paul Johnson.

It appears that Labour are planning on using a lawyer’s way out - appropriate for the prime minister - to emphasise that their pledge was “for working people” not employers.

Budget 2024: Latest news as proposed national insurance hike sparks row

Tuesday 15 October 2024 14:00 , Albert Toth

Hello and welcome to The Independent’s Budget 2024 live coverage where we’ll be bringing you the latest updates ahead of Labour’s fiscal event on 30 October.

Labour has been criticised in recent days for refusing to rule out an increase to employer national insurance contributions (NICs). Some experts say the measure would break their pledge to not raise taxes on working people – but officials have indicated that the government does not agree.

Institute for Fiscal Studies director Paul Johnson said the measure would be a “straightforward breach” of the Labour manifesto, but added that Ms Reeves will “almost certainly” need to break a manifesto commitment to meet her spending targets.

He says that a 1p hike in employer NICs would “probably not” be very damaging to jobs.

Shadow chief secretary to the Treasury Laura Trott said: “In 2021, the chancellor said increasing employer national insurance was a tax on ‘workers’. That’s why even in her own words it breaks Labour’s manifesto promise not to increase tax on working people.”

However, it has been pointed out that Ms Trott and her party had criticised Labour for not ruling out the measure in the run-up to the general election, implying they did not believe the manifesto had done so.