Decoding Labour’s 2024 Budget: Insights from Tom Anelay, Citypress’ Head of Public Affairs

Citypress’ Head of Public Affairs, Tom Anelay, gives some  thoughts on why Rachel Reeves made the decisions she did at Budget 2024.

What Budget 2024 told us about Labour’s approach to government

Away from the spin, the OBR describes the Budget as one that delivers “a large, sustained increase in spending, taxation and borrowing.” But why did Rachel Reeves make the choices she did?

Fear of the markets constrained Reeves’ approach

The Government is far more scared of surprising the financial markets than they are of the Speaker, Lyndsay Hoyle, telling them off for pre-announcing Budget measures outside Parliament. As a result, there were very few surprises despite the headline £40bn in tax rises – the biggest tax-rising Budget since 1993. Given Labour’s worries about a repeat of the Liz Truss mini-Budget, the pattern of trailing tax and spend measures in the media looks set to stay.

Labour is still trying to persuade the public that everything is the Conservative’s fault

According to polling from More in Common, 56% of the public don’t buy the tough choices narrative the Government has been selling. It was therefore no surprise that it took a while for Reeves to start setting out tax and spend measures. Instead, she spent the first fifteen minutes of her speech reminding everyone how terrible the Conservatives had been. Labour’s latest proof is a line-by-line breakdown of the £22bn black hole. However, after over a hundred days of repetition, some new charts are unlikely to persuade those they haven’t already convinced.

When it comes to spending, Labour are prioritising public services for investment

Labour consistently leads in polling on who the public trust to run public services – particularly the NHS. They also don’t need reminding that their victory was only made possible by a collapse in the Conservative’s reputation for competence which dropped from a high of 46% to a low of 14% just weeks before the polls opened.

As such, there is plenty of investment in the priority areas where voters interact with public services – notably the NHS and education. However, this means other Departments will continue to struggle with resources. Showing improvements in public services will be even more challenging as a lot of the additional spending has already happened. It’s not clear that voters have noticed yet and now they’re going to face some taxes…

When it comes to taxes, Labour are prioritising workers over pensioners whilst cracking down on wealth

At the 2024 election Labour led amongst every age group except those aged 65+.The retired were also the only group where the Conservatives held a lead. This provides at least some explanation for Labour’s focus on “working people” – who were technically shielded from tax rises. Many will also benefit from increases in minimum wage.

What Labour seem to be ignoring is that the higher your household income, the more likely you were to vote Labour. Yet this was a traditional Labour Budget which targeted wealth. VAT on private schools, private jets, maintaining income tax thresholds, increases in capital gains tax, beefing up tax avoidance checks, changes to inheritance tax and removing the non-dom scheme were amongst a swathe of measures that this will hit everyone from the moderately well off to the super rich.

Four in ten voters being paid over £50,000 voted Labour. That’s a lot of people that are going to get hit by tax rises which are not supposed to impact working people.

The growth and investment strategy still needs some work

Reeves tried to position this Budget as being the “invest, invest, invest” Budget. From a communications perspective this makes sense, following as it does on the heels of the Government’s Investment Summit. Yet having spent most of their time in opposition promising to be pro-business and pro-growth, for now expectations haven’t been met.

Some taxes on businesses, investors and entrepreneurs are lower than trailed but there were still significant rises to capital gains tax, carried interest for investors, and entrepreneurs relief. The OBR’s judgment is not encouraging. Private consumption and business investment is forecast to drop whilst government investment and spending will increase. Growth isn’t expected to get above a paltry 2%.

The forthcoming industrial strategy may provide more answers, but for now the Government’s plans for growth don’t add up.