What to Expect in the UK Autumn Budget 2024
At Centuro Global, we want to prepare our clients for the Budget’s most likely changes. Here’s what we expect to see tomorrow.
Asma Bashir | 29 October 2024
Tomorrow, the UK’s first female Chancellor will deliver arguably the most consequential budget in recent British history.
As we await Rachel Reeves’s statement to the House of Commons, there should be no doubt of Britain’s severe economic challenges. Public services are stumbling, debt is at 101% of GDP and the Chancellor is telling all and sundry of a £22bn ‘black hole’ in the public finances left by the previous Conservative administration.
The 2024 Autumn Budget is not just the latest iteration in a yearly financial exercise; it’s the Labour government’s strategic roadmap for the decade to come.
An Economy in Need of Revival
Paltry economic growth in the fifteen years since the Great Financial Crisis has coincided with ever-growing pressure on essential services such as healthcare and education. Reeves’s pitch to helm ‘the most pro-growth Treasury in UK history’ isn’t just window dressing – without a serious boost to growth rates, the tax receipts that will ensure a renewal in public services will be impossible.
With living standards barely higher than they were in 2008, a serious boost to economic growth is an existential matter for a government elected to arrest the rot. But the Chancellor must walk a tightrope of raising the country’s long-term growth potential while shoring up the public finances in the short term.
What the Budget Will Set Out to Do
So, the Autumn Budget needs to unlock mass investment to raise potential output without spooking the all-powerful gilt markets, suture the deficit and create the funds for immediate cash injections while still making the UK look more investable than its other European rivals. That’s no picnic, even for a Bank of England alumnus like Reeves.
Every Budget is a sprawling document, and we’ll only know all the details once Reeves finishes at the despatch box tomorrow. Until then, here are the government’s top objectives, the most likely levers they’ll pull to achieve them, and how they might affect you.
1. Strengthen public services
What to expect: The Budget is almost certain to provide a major boost in frontline funding for public services, particularly the NHS.
How this would impact you: In the long run, better public services could a healthier workforce, potentially lessening firms’ reliance on overseas workers. However, these measures will take a long time to bear fruit.
In a slow-growing economy, public sector cash injections don’t come free. Taxes will rise, with the burden primarily falling on businesses.
2. Fix the public finances
What to expect: The new Labour administration has accused its predecessors of ripping a ‘£22bn black hole’ in the public finances. Yet the government’s revenue-raising powers are limited by its pledges not to increase taxes on ‘working people’. This wording (along with weeks of briefing) points strongly towards a rise in employers’ National Insurance Contributions (NICs) and an extension of the freeze on income tax thresholds.
Reeves will probably stick to her promise to shield ‘working people’ by raising taxes paid by wealthy individuals and entrepreneurs, such as capital gains tax, inheritance tax and the tax paid by private equity executives on carried interest.
We should also expect day-to-day spending cuts to certain unprotected government departmental budgets.
How this would impact you: We foresee Reeves’s rise in employer NICs costing businesses between 1-2% more per employee each year.
The other rumoured hikes would incur higher costs when buying and selling shares, exiting your company or leaving money to your estate. If you’re in private equity, expect to see your income from carried interest taxed closer to conventional PAYE income.
Reeves has ordered a crackdown on Whitehall outsourcing. Consulting firms will likely see their public sector pipelines much drier than in recent years.
3. Raise living standards
What to expect: Britain has been dogged since the financial crisis by low productivity growth and stagnant real wages as a result of peculiarly low levels of investment. The government hopes to pull the country out of its ‘doom loop’ and usher in sustained growth in living standards.
Reeves has confirmed she will readjust the rules through which debt is measured, most likely to target public sector net financial liabilities. This should unlock up to £50bn of borrowing for public investment in infrastructure.
The Chancellor has also already confirmed a £22bn investment in carbon capture technologies, plus hundreds of millions for housebuilding. Expect more such announcements of big-ticket investments tomorrow.
How this would impact you: This stimulus programme could spell a windfall for companies operating in strategic sectors from renewable energy to housebuilding. Further subsidies and incentives to be announced could ease operating conditions still further.
Over the long term, infrastructure improvements could expand smaller firms’ talent pools by eliminating transport shortcomings that prevent workers from applying for jobs.
Having heavily trailed its plans to change the debt rules for weeks now, Labour is evidently nervous about incurring the wrath of the gilt markets. If Reeves’s groundwork fails to convince investors, a ‘moron premium’ charged on gilt yields like that seen in the 2022 Lizz Truss debacle could feed through into higher borrowing costs rates for private companies.
A rise in total factor productivity would be a blessing for UK firms that have lost ground to competitors across the Atlantic in recent decades.
A Decade of Renewal?
The government is selling this Budget as an effort to ‘fix the foundations’ and set national prosperity on a course to recovery.
Businesses and entrepreneurs facing immediate rises in taxes and staff costs will have to hope the juice turns out to be worth the squeezing. Even so, the major investment programme outlined so far should present big opportunities for those well-positioned to take them. Companies in strategic sectors will have a lot of business to do over the next few years.
Centuro Global Can Help You Prepare
At Centuro Global, we specialise in helping great companies navigate policy changes. Our team is ready to help you understand the implications of the budget for your business.
We’ll explain your tax obligations and regulatory compliance duties and point you towards new opportunities hidden in the legislation.
Get in touch for a consultation.
