UK Budget RECAP: Rachel Reeves announces £40bn tax raid and £3.2bn for Scotland
Chancellor Rachel Reeves has announced her UK budget for 2025/26, including a £40 billion tax raid.
However, it looks like £3.4bn will be coming the Scottish Government’s way next year.
Recap on The Scotsman’s live coverage of the budget.
UK Budget LIVE: Follow along as Chancellor Rachel Reeves sets out the Labour budget
Key Events
- UK Chancellor Rachel Reeves is expected to address the House of Commons at 12.30pm
- It is widely speculated employer National Insurance contributions will be increased
- Labour has promised more money will be going to the Scottish Government
Welcome to our live blog!
Welcome to our live blog!
Rachel Amery, The Scotsman’s political correspondent here - I will be with you throughout the day to bring you all the latest in the UK budget.
I’m on my way through to the Scottish Parliament just now - but our Westminster Correspondent Alexander Brown will be on the ground in the House of Commons to watch the speech as it happens.
The rest of the politics team, and a whole host of The Scotsman’s specialist writers, will be on the ground to make sense of the budget and why it is important for Scots.
It’s a pretty bad financial landscape for the Labour budget - there’s no real way of dressing that up.
Chancellor Rachel Reeves says there is a £22 billion black hole in public finances.
Her party also says there needs to be a £40bn increase in taxation and spending to support public services going forward.
Given this, there is likely to be disappointment for many somewhere in today’s budget.
The picture is not much better in Scotland - Scottish Finance Secretary Shona Robison cut £500 million from public services over the summer and halted all but essential government spending.
We already kind of know there will be some announcement on National Insurance.
In its manifesto, Labour promised not to increase National Insurance or VAT - but specifically said it would not increase taxes on “working people” (cue a long-winded debate on the exact definition of a working person).
Because of this there is widespread speculation this means there will be an increase to employer National Insurance contributions.
The Fraser of Allander Institute, based at Strathclyde University, said: “Much of this is because they want to claim, dubiously, that employer National Insurance contributions is not a tax on working people, and therefore not a manifesto commitment broken.
“If this hadn’t been the case it is likely that this phrase may have morphed more into people on or around average earnings or something similar - and if that is what they meant, perhaps they should have just said that.”
This could have a knock-on effect on Scottish public services if the public sector has to increase its payroll taxes.
Scotland has a higher proportion of public sector employees than it gets as a share of compensation from the UK Treasury (22.1 per cent of workers compared to 17.3 per cent across the UK) so there could be a bigger squeeze on Scottish public service budgets compared to the rest of the UK.
It is not just National Insurance we need to keep an eye on today - we can’t forget about income tax.
The chancellor is expected to freeze income tax thresholds and the personal allowance (what you have to earn before you start paying tax) because the previous Conservative chancellor included this in his fiscal projections.
Now income tax rates and bands are devolved to Holyrood, and therefore won’t impact Scottish taxpayers, but the personal allowance rate is reserved and will affect Scots.
If the personal allowance is frozen, it means as more people’s wages increase, more people will start earning enough money to start paying tax.
Some other taxes to keep an eye on today - capital gains tax, inheritance tax, pensions tax relief and fuel duty.
If the chancellor freezes fuel duty it would cost at least £2.5 billion in 2025/26 and nearly £1bn in each subsequent year - but increasing it could open Rachel Reeves up to political attacks that it is a tax on working people.
Benefits may be another tricky one for the chancellor in today’s budget.
Labour plans to cut around £3 billion from the welfare budget.
According to the House of Commons Library this could cost around 45,000 Scots up to £4,681 a year.
Ms Reeves is also expected to tighten up work capability assessments, which determine whether or not a person is able to work due to their health or disability.
Now while disability benefits are devolved to Holyrood, Universal Credit and statutory sick pay is reserved so it is still worth keeping an eye out for.
Today’s budget may not solve headaches in Scotland, but it will at least provide more clarity and certainty.
Over the summer Finance Secretary Shona Robison cut £500 million from public services and put a halt on all but essential government spending.
She said this was necessary because of so much uncertainty on how much cash is coming the Scottish Government’s way in the chancellor’s UK budget.
It’s probably a good time to point out the Scottish Fiscal Commission recently put out a report which said while this is true, a lot of the Scottish Government’s financial pressures are down to their own economic decisions.
Today we will ultimately find out how much the Scottish Government will be getting for its 2025/26 budget, which Ms Robison will set out on December 4.
The Fraser of Allander Institute, based at Strathclyde University, says that if we go by reports from Northern Ireland, Scotland could receive around £1 billion in Barnett consequentials.
It said: “Given the focus on investment spending in the rhetoric from the UK Government, we could well be in a situation where the outlook for capital spending improves, but (given the rumoured changes to departmental spending) the resource spending outlook is even tighter than the current outlook.”
Last night Chancellor Rachel Reeves announced that minimum wage will be increased in today’s budget.
The national minimum wage is currently £8.60 an hour, but this will increase to £10 in April 2025.
This is the largest increase in minimum wage on record.
Since April 2024, employees aged 21 or over have been entitled to the national living wage - it is currently £11.44 an hour but will increase to £12.21 next year.
Last night Scottish Secretary Ian Murray said: “Labour’s plans to make work pay will deliver a pay rise for Scotland, with the biggest increase for young workers on record, as well as more rights and security at work for everyone.
“These changes will help 200,000 of the lowest paid workers in Scotland.
“This is the change Scotland voted for and the beginning of the change Scotland needs to see.
“The budget tomorrow will herald an era of growth for Scotland.”
Not everyone is happy at the increases to the national minimum wage in today’s budget
UK Hospitality says this could add £1.9 billion to wage bills in the sector.
Kate Nicholls, chief executive of UK Hospitality, said: “These wage rises are well above expectations, and make the budget even more important.
“It’s an added £1.9bn to the hospitality wage bill, on top of the cost of the Employer Rights Bill, and, if rumours about the budget are true, employer National Insurance contributions and business rate rises.
“Trying to balance the books from the pockets of high street businesses will simply leave hospitality as collateral damage - threatening jobs, future investment, price increases for consumers and business viability.
“Businesses will be approaching [today’s] budget with even more trepidation following this news.
“Our companies desperately want to be able to support higher wages for staff but what is being asked of them is simply unsustainable if taxes are going to shoot up at the same time.
“In light of this, it’s paramount that the budget includes targeted measures to support the high street and the cost burden it is facing.
“That must start with addressing the broken business rates system and implementing a lower, permanent and universal level for hospitality.”
Timings to look out for today:
9am - Chancellor Rachel Reeves addresses the UK cabinet in Downing Street
11am - the chancellor will come out of Downing Street with the iconic red box
12pm - Sir Keir Starmer faces prime minister’s questions in the House of Commons
12.30pm - budget time - Rachel Reeves addresses the House of Commons
1.30pm - key documents from the UK Treasury and the Office for Budget Responsibility go online - at the same time, leader of the opposition Rishi Sunak will deliver his response
2.30pm - the Office for Budget Responsibility will give a press conference
5pm - Rachel Reeves addresses Labour MPs at a private meeting
This is what has been officially confirmed as being included in today’s budget.
- Fiscal rules will change to count investment
- Minimum wage will increase by 6.7 per cent
- Right-to-buy discounts for council tenants will be cut
- £240 million for work, health and skills support for disabled and sick people
There’s plenty more including investment in the NHS, education and housebuilding - but as these matters are devolved to Holyrood, won’t have much impact on Scotland.
What are the papers saying today about taxes and the budget?
The Times says capital gains tax will be increased on shares, but not properties and suggests there will be an increase in tax on carried interest for private equity investors.
There are numerous reports that inheritance tax could be reviewed on agricultural properties, and exemptions on pensions if someone dies before the age of 75 could be closed.
The Daily Mail says the temporary 5p cut to fuel duty will end.
The Guardian, the BBC and the FT all say the UK Treasury is reconsidering the manifesto pledge to close non-dom loopholes over fears it will raise little to no money as all the rich non-doms have left the UK.
When it comes to employer National Insurance contributions - The Times says this will not apply to employers’ pension contributions, and The Telegraph says the chancellor will cut the lump sum that can be taken tax-free from pension pots.
The Guardian says taxes will be raised on vapes, and there may be a flat tax on all nicotine products.
The Scottish Greens say Labour needs to use a wealth tax on the super rich in this budget to fund the green transition.
They say this will help tackle both the climate and nature emergencies by applying a wealth tax to the wealthiest one per cent of UK households (i.e. those with assets worth £3.4 million and above).
Analysis from Greenwich University suggests this could raise £70 billion a year.
Co-leader Lorna Slater said: “The world is burning around us - we urgently need to see climate leadership from Downing Street.
“There is more than enough money to support our transition to a greener future and create thousands of high quality, well paid green jobs, but so much of it is being hoarded by a tiny number of extremely wealthy people who don’t need it.
“The solution is staring us right in the face - by asking the richest people and corporations to pay their fair share we can transform our economy and protect future generations.
“Making the change is essential for our climate, but it is also crucial for our economy.
“The UK has a huge opportunity, but it has been squandered by 14 years of a Tory government that actively undermined our climate efforts while giving handouts and tax breaks to its super-wealthy friends and donors.
“Labour must show the level of ambition that is needed by making a generation-defining investment in clean, green renewable energy and nature restoration and ending the climate vandalism of the Tories.”
Ms Slater added: “The pain that households and families have suffered over the last 14 years was not inevitable.
“The cuts and austerity were a political choice, and one that Labour has doubled down on by cutting winter fuel payments and refusing to lift the cruel two-child cap.
“Labour can put an end to the cuts and support vital services like our NHS and schools.”
The SNP sas the chancellor must abandon her “damaging plans” to impose austerity cuts to public services and household incomes when she sets out the budget.
Westminster leader Stephen Flynn says Rachel Reeves must instead use the budget to invest in the NHS and put money back into people’s pockets.
He said “voters in Scotland feel cheated and betrayed by a Labour Party that promised change - only to break its word, and impose deeper austerity cuts than the Tories, as soon as they got into power”, and warned the chancellor “must reverse these Labour Party cuts and deliver the step change that voters were promised”.
The SNP says they want to see a five-point package of investment in the budget:
1 - at least £16 billion a year extra for the NHS, and real-term increases for all public services
2 - reversing cuts to the winter fuel payment, lowering bills by freezing fuel duty, introducing statutory social tariffs, and cutting household energy bills by £300
3 - scrapping the two-child benefit cap, abolishing the bedroom tax and matching the Scottish Child Payment by raising the child element of Universal Credit by £26.70 per child per week
4 - reversing the £800 million cut to Scotland’s capital budget
5- Rejoining the EU single market.
Chancellor Rachel Reeves has left Downing Street with her iconic red box.
She has now arrived in the House of Commons where she will deliver the 2025/26 UK budget in about an hour.
The Prime Minister is clearly excited - Sir Keir Starmer has posted online to say the budget will pave a “brighter future” for the UK.
Posting on X, he said: “This is a huge day for Britain.
“After 14 years of decline, we will invest in our country - rebuilding our schools, hospitals and roads.
“We won’t shy away from the tough decisions to grow our economy and protect working people’s payslips.
“There is a brighter future ahead.”
Prime Minister Sir Keir Starmer has now left Downing Street as well.
He will give prime minister’s questions in the House of Commons at midday, immediately followed by Chancellor Rachel Reeves’s 2025/26 budget statement.
There will be lots of financial boffins working away in the background today to check the chancellor’s sums.
The independent Office for Budget Responsibility is the UK Government’s spending watchdog, and will also produce a forecast today to coincide with the budget.
This forecast will predict whether the government will spend more money than it raises, whether the UK economy will grow, and what impact that will have on living standards.
Various economic think tanks will also create their own reports - one to keep an eye out is analysis from the Fraser of Allander Institute, which will be Scottish-specific.
Comments
Want to join the conversation? Please or to comment on this article.