THE Chancellor’s focus on education and health in her first Budget since the new Government came to power has been welcomed by the lead bishop for economics and business in the House of Lords.
“First and foremost, this budget must be viewed through the lens of how it affects the poorest and most marginalised people in our society,” the Bishop of Newcastle, Dr Helen-Ann Hartley, said on Wednesday. “I recognise the challenges the Chancellor faces, and welcome the focus on education and health.”
Charities, however, expressed concern about the limits of the Budget’s help for those most in need. The chief executive officer of Christians Against Poverty (CAP), Stewart McCulloch, warned: “With social security rates only set to increase by 1.7 per cent, millions will still be left with the reality that their income is not high enough to cover the costs of essentials.”
With a pledge to set about “restoring stability to public finances and rebuilding our public services”, the Chancellor, Rachel Reeves, announced tax rises of £40 billion, taking the overall tax burden to 38 per cent of GDP by the end of decade, the highest level on record. It was about 37 per cent in 1948. Government spending is set to rise by £70 billion a year over the next five years, with half of the increase funded by an increase in taxes, mostly from an increase in employer national insurance contributions.
Promising no return to the “austerity” of the previous government, and pointing to an inherited “hole” in the public finances, Ms Reeves told the House of Commons that she had “had to take some very difficult decisions on tax”.
She went on to set out large increases in public spending, including a £22.6-billion increase for health, “the largest real terms growth in day-to-day NHS spending outside of Covid since 2010”.
While the Budget did not include the “Essentials Guarantee” called for by Trussell and the Joseph Rowntree Foundation, which would commit the Government to setting Universal Credit (UC) at a level sufficient to cover basic needs, the Chancellor referred to both charities in announcing a reduction in the level of debt repayments that can be taken from a household’s UC payment each month from 25 per cent to 15 per cent. It is expected to benefit about 1.2 million households, by an average of £420 a year.
She also confirmed that the Government would provide £1 billion to extend the Household Support Fund and Discretionary Housing Payments in 2025-26, used by local authorities to address immediate hardship and crisis. Those claiming Carers Allowance will now be eligible while in work for up to 16 hours a week.
In a speech that emphasised public-service reform, as well as spending, Ms Reeves announced a crackdown on fraud in the welfare system — often the work of criminal gangs, she said — by which the Government hopes to save £4.3 billion a year by 2029-30. The UC rollout is expected to be completed in 2026, while reforms to the system of health and disability benefits are to be set out early next year, as part of the Government’s pledge to support into employment more of the 2.8 million people out of work owing to long-term sickness.
Mr McCullough warned that “full-time paid employment is not always an option for those facing disabilities or with caring responsibilities.” While the State Pension is set to rise by 4.1 per cent, in line with the “triple lock”, working-age benefits will be uprated by the inflation rate of 1.7 per cent. CAP warned earlier this year that as many as 47 per cent of its clients had an “unsustainable budget” — a deficit of about £273 a month (News, 20 September) — and echoed the call for an Essentials Guarantee.
The Child Poverty Action Group lamented that “this was not a Budget of bold action on child poverty.” The Chancellor had “missed a golden chance to scrap the two-child limit, a policy that will pull 16,000 extra children into poverty by the time the Government’s child poverty task force reports in the spring”, it said.
Mark Russell, chief executive of the Children’s Society, also expressed disappointment about the retention of the limit. He welcomed a “change in direction emphasising the rebuilding and restoring of public services” but said that teenagers needed to see “a similar focus on rebuilding childhoods especially considering the urgent need for better mental health support and reducing child poverty”.
The executive director of CAFOD, Christine Allen, expressed disappointment at the lack of reference to overseas development aid, which had been “slashed and pillaged in recent years”. Aid to other countries could fall to its lowest level since 2007, she said.
Recalling that, in the 1980s, her sixth-form had been housed in “a couple of prefab hubs in the playground”, Ms Reeves pledged £6.7 billion of capital investment in education next year: an increase of 19 per cent on this year. More than 500 schools would be rebuilt, she said, while investment in breakfast clubs would be tripled, funding them in thousands of schools. Special Educational Needs would receive a £1-billion uplift: a six-per-cent increase in real terms from this year. She reiterated the Government’s plan to levy VAT on independent-school fees from January.
Amid warnings by the Local Government Association that one in four councils may need emergency government bailout agreements to stave off bankruptcy in the next two years, the Chancellor announced an increase of £1.3 billion in grant funding, including at least £600 million to support social care. She also announced a reduction in discounts on the Right to Buy scheme, and a move to enable councils in England to keep all the receipts generated by sales. The Government has set a target of 1.5 million new homes over the course of the current Parliament.
Among the commitments trailed before the Budget was a 6.7-per-cent increase in the National Living Wage from April, to £12.21 an hour. The National Minimum Wage will rise by 16.3 per cent for 18- to 20-year-olds, from £8.60 to £10.
Noting the increase in Capital Gains Tax to 24 per cent (still the lowest in the G7, according to the Chancellor), Bob Collins, a global managing director at TrustBridge Global, which connects donors and charities, suggested that investors were “urgently now looking for ways to beat the tax trap and divest their assets before April next year”. He predicted that charities, exempt from the tax, would “likely see a flood of charitable giving” from such investors.
Ms Reeves, who is an Anglican, began her Budget by noting that she was the first woman to hold the office of Chancellor of the Exchequer. “To girls and young women everywhere, I say, let there be no ceiling on your ambition, your hopes, and your dreams.”