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Martin Lewis has given a definitive run down on Rachel Reeves‘ Budget, as he warned that ‘someone will have to pay’ for Labour‘s new policies.
In a massive package that left Westminster stunned, the Chancellor shifted the country decisively towards a European high-tax, high spending model.
A huge £25billion National Insurance raid on firms was introduced, in which employers’ NI contributions will rise by 1.2 per cent to 15 per cent in April 2025.
Mr Lewis, the founder of MoneySavingExpert.com, asked how businesses will pay for a £615 surge per employee.
He wrote on social media: ‘The change of threshold so employers now start paying National Insurance at £5,000, not £9,100, is big.
Martin Lewis (pictured) has reacted to Chancellor Rachel Reeves’s Autumn Budget by asking ‘who is going to pay for it?’
My instant Budget reaction – everything you need to know at speed.
(Subtitled version coming soon, wanted to get it out quick)
Feel free to share pic.twitter.com/ewDye8xn2S
— Martin Lewis (@MartinSLewis) October 30, 2024
Mr Lewis, the founder of MoneySavingExpert.com, asked how the businesses will pay for a £615 surge per employee
‘For the employers who pay it, at the new 15 per cent rate that alone’s £615 increased cost per most employees per year.
‘The question is where will that money come from, profits, increasing charges or reducing salaries/benefits?’
Budget 2024: Key points
Rachel Reeves became the first female chancellor to present a Budget today as she presented Labour’s first government economic plan for 14 years.
In her Budget the Chancellor:
- Confirmed she was raising taxes by £40billion
- Froze fuel duty, when it was expected she would increase it, because of the impact on consumers.
- Increased employer National Insurance Contributions by 1.2 points to 15 per cent from April, while reducing threshold from £9,100 to £5,000, to raise £25bn.
- Made inherited pensions subject to inheritance tax.
- Increased lower rate of capital gains tax from 10 to 18 per cent, and the higher rate from 20 to 24 per cent
- Reveals economic growth is forecast to be just 1.6 per cent by the end of Labour’s first term in office.
- Announced a crackdown on fraud in the UK’s welfare system, as part of reforms to ensure welfare spending is ‘more sustainable’.
- Pledged to maintain the Bank of England’s 2 per cent inflation target.
- Confirms National Living Wage will rise to £12.21 next year.
- Said she was ‘deeply proud to be Britain’s first ever female Chancellor of the Exchequer’.
- Sparked uproar from the Tories by claiming it was ‘not the first time that it has fallen to Labour to rebuild Britain’.
- Accused the Tories of calling an early election ‘to avoid making difficult choices’ in the Budget themselves.
- Announced she is setting aside £11.8bn and £1.8bn to pay victims of the infected blood and Post Office scandals respectively.
Mr Lewis added: ‘The reason I say ”for employers who pay it” is because the Employers Allowance for NI has been increased from £5,000 to £10,500 a year (so this is amount off employers NI bill) so small businesses won’t pay it.’
The move comes after Labour’s party manifesto said it would not increase taxes on working people.
In a video posted on X, formerly Twitter, Mr Lewis said: ‘Something is going to have to pay for that, it will either come out of companies’ profits, increased costs to consumers, or reduced salary and benefits in future for employees.
‘So while it is not a direct cost on consumers, it probably will have some knock-on effects on consumers and workers in the future.’
Ms Reeves today said there were ‘no shortcuts’ to delivering growth as she set out plans to ‘fix the foundations’ of the economy.
In the first Labour Budget since 2010 – and the first ever delivered by a woman – Ms Reeves promised to ‘invest, invest, invest’.
She will change the way debt is measured to allow extra borrowing to ‘rebuild Britain’, with tax hikes expected to help repair the public finances.
The Chancellor told MPs: ‘On July 4, the country voted for change. This government was given a mandate. To restore stability to our country and to begin a decade of national renewal.
‘To fix the foundations and deliver change through responsible leadership in the national interest. That is our task. And I know we can achieve it.’
She said her ‘belief in Britain burns brighter than ever’ but ‘the only way to drive economic growth is to invest, invest, invest’.
‘There are no shortcuts. And to deliver that investment we must restore economic stability and turn the page on the last 14 years.’
The Office for Budget Responsibility said Ms Reeves’s plan ‘delivers a large, sustained increase in spending, taxation, and borrowing’.
Public spending increases by almost £70billion a year over the next five years.
‘As a result, the size of the state is forecast to settle at 44% of GDP (gross domestic product) by the end of the decade, almost five percentage points higher than before the pandemic.’
Half of the increase was funded through tax hikes raising around £36billion a year and pushing the tax take to a ‘historic high of 38% of GDP by 2029-30’.
The other half is funded by £32billion a year of increased borrowing, which the OBR called ‘one of the largest fiscal loosenings of any fiscal event in recent decades’.
