Chancellor Rachel Reeves has introduced a pivotal budget designed to rebuild the economy, support public services, and raise living standards for millions.
Amid economic challenges, the budget emphasizes investment in health, social care, housing, and infrastructure, while restructuring taxes and business support for future stability.
Restoring Public Services: NHS and Social Care
Facing the challenge of lengthy NHS wait times, Reeves announced a significant additional investment of £22.6 billion in health and social care over the next two years.
Consequently, this substantial funding boost aims to facilitate around 40,000 more elective procedures weekly, thereby tackling the NHS backlog effectively.
Tax Reforms: Funding the Future
To balance public investment with fiscal responsibility, the budget outlines adjustments to various taxes:
- Employer National Insurance Contributions: An increase of 1.2 percentage points, which will impact businesses yet is projected to generate significant revenue to support public services.
- Capital Gains Tax (CGT): Rates are rising to 18% for basic rate taxpayers and 24% for those in the higher tax bracket.
- Inheritance Tax: Thresholds will remain frozen until 2030, maintaining the status quo on inheritance-related taxation while supporting fiscal stability.
These tax adjustments reflect the government’s emphasis on shared responsibility, aiming to fund essential services through equitable contributions.
Raising Living Standards
A centerpiece of the budget is a rise in the National Living Wage to £12.21 per hour, set to benefit approximately three million workers nationwide.
Consequently, this adjustment reflects a nearly 10% increase, directly aligning wages with the rising cost of living and ensuring that income levels better match inflationary pressures.
In addition, fuel duty is frozen for a year, and the 5p-per-litre cut is extended to 2026—a relief for motorists and transport-reliant industries.
Investing in Infrastructure and Housing
Reeves’ budget prioritizes improvements to infrastructure and housing:
- Local Roads: A £500 million boost for road maintenance, scheduled for 2025-26, aims to improve travel conditions and reduce road-related expenses for local councils.
- Affordable Housing: An additional £500 million will support the Affordable Homes Programme, addressing housing demand and enhancing accessibility to affordable options.
Infrastructure investments yield long-term benefits: boosting construction employment and enhancing housing access for low- to moderate-income households.
Support for Business Growth
Small businesses and the retail, hospitality, and leisure sectors receive considerable support under this budget:
- Employment Allowance: Raised to £10,500, reducing employer costs for smaller enterprises and encouraging new hiring.
- Business Rates Relief: Offering 40% relief for businesses in retail, hospitality, and leisure—industries that are still recovering from pandemic-related setbacks.
These measures aim to stimulate growth in sectors critical to both employment and GDP.
Measure |
Allocation |
Impact |
|---|---|---|
| NHS & Social Care Funding | £22.6 billion | Reduce waiting lists, expand procedures |
| National Living Wage | £12.21/hour | Benefit 3 million workers |
| Employer NIC Increase | +1.2% | Generate funds for public investment |
| Local Road Maintenance | £500 million | Improve transport infrastructure |
| Affordable Housing Programme | £500 million | Increase housing accessibility |
| Employment Allowance Increase | £10,500 | Support small businesses |
| Fuel Duty Cut Extension | Until 2026 | Provide relief for motorists |
A New Fiscal Framework for Long-Term Stability
Moving Forward
To effectively manage the UK’s financial direction, Reeves introduces two new fiscal rules: a “stability” rule to control debt levels and an “investment” rule for sustainable growth.
This framework, with bi-annual reviews and annual fiscal events, maintains transparency, stabilizes finances and prevents overspending effectively.
In Reeves’ words,
“This budget is a commitment to Britain’s people—delivering both the support they need today and a vision for economic resilience tomorrow.”
Sources: THX News, HM Treasury & The Rt Hon Rachel Reeves MP.
