The Whole Nation Take on the Autumn Budget 2024

This week’s offering is somewhat different, as we take a Whole Nation overview of the Autumn Budget 2024.

A budget that has been roundly vilified, and from a Whole Nation perspective, the vilification is entirely justified, despite some welcome measures.

The Office for Budget Responsibility (OBR) published its Economic and Fiscal Outlook, and two forecasts embody the Budget’s failure: inadequate real GDP growth and rising CPI inflation. Real GDP growth is forecast to be 1.1 per cent this year, 2.0 per cent in 2025, and 1.8 per cent in 2026, before falling back to around 1½ per cent thereafter (2) - far below what we would need to maintain current levels of public services, let alone the government’s plans to significantly expand the remit of the state. Inflation, having fallen back to around the 2 per cent target in mid-2024, is expected to pick up to 2.6 per cent in 2025 partly due to the direct and indirect impact of Budget measures (2), above the Bank of England’s 2% target. Having recently seen what the scourge of inflation does to living standards, this seems a big risk to take with next-to-no upside.

But do any measures help close regional, generational, and socio-economic opportunity disparities?

The short answer is not many at all.

Budget Measures

The announced £100 billion in capital investment (1) is one of the less objectionable ones. Uplifts in housing, transport, and R&D will all make access to family life, jobs, and wealth creation somewhat easier. However, and it is a big however, the government’s current light-touch approach to planning reform, transport, and new industries cement in greater centralisation, and papers over the root problem with a vast amount of government expenditure. Additionally, on housebuilding, housing targets have been decreased in London - basically exempting the epicentre of the UK’s housing crisis from having to address its folly.

Speaking of our housing crisis, the Budget also set out an increase in the Higher Rates for Additional Dwellings in Stamp Duty Land Tax on the purchases of second homes, buy-to-let residential properties, and companies purchasing residential property, from 3% to 5% from 31 October 2024 (1) which is likely to discourage landlords, squeezing the supply of private rental homes and increasing rents.

A big announcement was the National Living Wage paid to over-21s will go up by 6.7% while the National Minimum Wage for 18 to 20-year-olds will see a 16% increase (1), which is also welcome. The move towards a single adult minimum wage is of particular merit, specifically in roles where 18 to 20-year-olds are fulfilling the same role to the same standards, but there must be care to ensure this doesn’t limit supported employment or skills development. Yet, with any such rise, there must be equal regard for businesses. In particular for SMEs - to ensure the increase and the current employment rate are maintainable. 

Unfortunately, here they have failed once again. Tinkering with business rates, thresholds, and allowances will not sufficiently offset this rise, and when combined with the ill-advised increase in the rate of employer NICs by 1.2 percentage points to 15% (1), will lead to stagnating wage growth - 76% of the total cost of the rise is likely passed through lower real wages (2). The employer NICs rate increase is also estimated to reduce labour supply by 50,000 average-hours equivalents (2) at a time when we need businesses to be able to grow and invest. A thriving job market is necessary to combat the opportunity disparities between regions, so this just doesn’t cut the mustard.

The government also is freezing fuel duty and extending the temporary 5p cut for one year (1), which is one of the biggest wins. In our rural areas, a car is often a necessity due to the geography of the land and the impracticability of delivering public transport. In many of these areas, it would be cheaper to pay for taxis for the individuals wanting to use public transport than it would to put on a service. In our most deprived rural areas, many less well-off families make sacrifices to run a car, and it is right that these costs are not exacerbated by fuel duty rises.

This tacit understanding of transport, however, ends there for this government. In choosing to disregard the £2 cap on bus fares, and instead increasing that cap to £3 (1), they directly hit the most deprived working people in the country, endangering many rural to semi-rural bus routes. The renaissance of regions outside our biggest towns and cities will rely on these links, and we cannot hope to ‘stay local, go far’ without them.

Another big headline from the Budget was the changes to Inheritance Tax - particularly on combined business and agricultural assets, such as family farms (1). Again, they demonstrate how little they understand rural life, jobs, and wealth creation. These measures are likely to see many family farms cease to exist, along with the food security, business, and community contributions they make.

Then, there is the application of VAT to private school fees. Setting aside its dangerously anti-aspiration message, as this measure displaces up to 200,000 pupils from independent to state education, a large amount of the revenues gained from it will be needed to accommodate those pupils. It is also likely to reduce availability of bursaries. It will simply leave private education as the preserve of the very rich whilst making a negligible difference to state education. Somebody’s success is not the demise of another’s, and acting as if that is the case does nothing but hold us back. Another grade F for the government.

The Budget does not drive towards the ambition of harnessing the talents of all regions, generations, and socio-economic backgrounds. Rural deprivation is overlooked. It misunderstands the root causes of our country’s most embedded problems and is, in equal measure, far too radical and not radical enough. It weaponises class, trashes social mobility, and crowds out the private sector… all for a sugar rush that will last the equivalent of five minutes before hastily leaving a bad taste in your mouth.

The Whole Nation needs and deserves better.

References

(1) Autumn Budget, HM Treasury, 2024, Autumn Budget 2024 – HC 295 (publishing.service.gov.uk)

(2) Economic and Fiscal Outlook, Office for Budget Responsibility, 2024, Economic and fiscal outlook – October 2024 - Office for Budget Responsibility (obr.uk)