2024 Uk Autumn Budget - Fraser Of Ailender Institute Reaction

31st October 2024

A big tax-and-spend budget, and a lot more borrowing - but looser fiscal rules bail out the Chancellor
This was a big first Budget from Rachel Reeves, and a big rebalancing of Government priorities. Taxes were raised significantly - by an average of £35bn a year from April onwards - but spending has gone up by significantly more, at an average of £70bn. This means that borrowing is up by an average of over £30bn in every year of the forecast.

In the short-term, the Chancellor has opted to borrow an extra £20 billion, allowing spending to rise in-year to combat the short-term pressures and public sector pay decisions she highlighted back in July. Over the longer run, capital spending in particular has been raised by a lot, and we'll need to wait to see how much of it is delivered – governments being notorious for finding it difficult to disburse large step-changes smoothly.

How does she make this add up? It's all to do with the changing of the fiscal rules. If she'd maintained the underlying debt rule, she’d have broken it by £6bn. She also leaves less headroom against the current budget surplus than Jeremy Hunt had, and spent three-quarters of her newly found headroom in the debt measure. With such little room to manoeuvre, if many of the highly uncertain revenue raisers don’t bring in as much money as forecast, it’s not certain at all the Chancellor will meet these new rules.

For Scotland, there has been a really significant uplift in spending – largely through the Barnett formula due to higher spending in devolved areas. Funding for day-to-day spending is £1.5bn higher this year, which is likely to make the Scottish Government’s job of balancing its budget significantly easier. Barnett consequentials are £3.4 billion next year as well, of which £2.8bn is day-to-day spending. The Treasury will also be providing compensation for higher staff costs through the NICs measure for public sector employers – our understanding is that this will be in addition to the £3.4billion announced today.

Read the full article HERE