Archive for: Blog Posts

Written by Michael Kane and Laura Fitzgerald. 

Nearly four months on from the 2024 General Election and the UK’s first female Chancellor Rachel Reeves finally delivered the Government’s Budget. The hefty 170-page document, and Reeves’ accompanying statement to the Commons, goes some way to provide further clarity on the Government’s priorities. In this sense, it feels like a particularly significant Budget given the accusations that Labour attempted a ‘Ming vase strategy‘ of avoiding difficult decisions in the election, and the relative ambiguity about priorities after their first 100 days.

Whether the Budget provides complete clarity on the above is yet to be seen. Nonetheless, it certainly provides some takeaways to be explored.

The return of tax and spend?

Just as the Budget was enormous in terms of its significance, the announcements on taxation, borrowing, and spending were equally as huge. In contrast with Reeves’ relatively steady approach before the election, with only minor tweaks to taxes and spending mentioned in Labour’s manifesto, yesterday saw the Chancellor in a markedly different light.

From the announcement of record tax rises by £40bn, to one of the largest increases in spending since the 2000 spending review at almost £70bn, the Autumn 2024 Budget was nothing short of historic. The majority of the £40bn worth of tax rises will come from a £25bn increase in employers’ National Insurance contributions – a tax take which reportedly places the UK at almost level with the Netherlands, and seen by some as Labour’s move towards a more ‘European-style economy.’ Increases in borrowing were also announced yesterday, facilitated by Reeves’ choice to change the UK’s fiscal rules which loosened the constraints around borrowing to invest.

These decisions, while drastic, are hoped to precipitate economic growth and prosperity in the long-term – ‘no pain, no gain’. However, the fiscal forecast from the Office for Budget Responsibility does seem to augur such an explosion of growth. It finds that, while GDP will increase to 1.1 percent this year and to 2.0 percent next year, the rate will then fall to 1.8 percent in 2026 and to 1.5 percent thereafter. Will Reeves’ gamble pay off? Or will the Budget fall short of the investment needed to truly ‘fix the foundations’?

The Government’s farming predicament

The lead-up to the Budget saw Reeves repeatedly warn of the ‘tough decisions’ that need to be made to fill the blackhole in public finances, and this was certainly true for the UK’s farming community. Farmers were among those dealt the most devastating blow yesterday, leaving many to fear for their livelihoods and legacy of their life’s work alike.

The reform in question includes a limit on inheritance tax relief for farms to £1m, a move which farmers claim will make inheriting family farms unviable, and a policy which the National Farmers’ Union has called ‘disastrous‘. Concerns have also been raised regarding the impact of the tax relief cap on food security and the ability of future generations to grow British produce. This would have implications for both businesses and consumers, making the UK more heavily reliant on imports, affecting sustainable food production and undermining commitments to protect the environment.

Broadcasters Jeremy Clarkson and Rachel Johnson are among the critics of the reform, taking to X to express their anger towards the announcement. Clarkson, presenter of the programme ‘Clarkson’s Farm’, urged farmers not to despair and to ‘look after [themselves] for five short years’ by which time ‘this shower will be gone’, while Johnson blasted the Government’s decision in order to raise ‘a measly £500m’.

With details on the Government’s new deal for farmers yet to be published, the Government’s promises to enhance rural economic growth and food security could seem something of a distant reality. The Government did allocate £500mn in Project Gigabit and the Shared Rural Network to enhance broadband provision in underserved rural areas, but whether rural communities feel sufficiently supported is another matter.

Local Government finance

Coming into the Budget, the challenges facing Local Government were stark: among the council Chief Executives who responded to a pre-budget survey from the Local Government Association, over half said they were likely to declare financial bankruptcy in the next five years. Therefore, addressing the challenges facing Local Government is vital on a practical level, given the role Local Government plays as first point of contact for many citizens in the delivery of vital services such as social care, SEND provision, and housing. Additionally, the sentiment in Labour’s pre-election manifesto illustrates the Government’s intention to further devolution across England – self-evidently, this is only feasible with sustainable funding.

The Budget attempted to grapple with the significance of the situation by promising an additional £1.3bn of new grant funding for local authority services. Most notably, this included £600m for social care and an additional £233m spending in 2025-26 on homelessness prevention. This may go some distance to provide an immediate sticking plaster over funding gaps, however questions remain about the long-term sustainability of this approach. Firstly, this is not enough to address the £2.3bn funding shortfall, as noted by the think tank Reform. Secondly, a more fundamental rethink about the funding and organisation of Local Government may prove to be a more successful strategy – perhaps revaluing council tax could be a starting point. However, the Budget revealed that the proposed devolution legislation will involve ‘working with councils to move to simpler structures that make sense for their local areas’ – this is something to keep an eye on given the demand to reorganise local government in England.

Looking beyond the headlines

There were aspects of the Budget that did not grasp the prevailing headlines and soundbites that the Government briefed – this includes proposals that were hidden and the shortcomings of some of the announcements. First, the Government revealed that they will consult next year on proposals to bring remote gambling (gambling offered over the internet, telephone, TV and radio) into a single tax. Preceding this, the Social Market Foundation and the Institute for Public Policy Research had both suggested increasing tax on remote gambling. Curiously, the Government’s announcement did not make it into Reeves’ speech or the main text in the document – instead it was to be found in the policy announcements section towards the end of the document. Significantly, this speaks to Labour’s prior ambiguity on gambling regulation with their manifesto simply suggesting that they would ‘reform gambling protections’ and that they are ‘committed to reducing gambling-related harm’. Given the centrality of prevention to the Government’s agenda for health policy, this is something to keep an eye on, even if the Government does not shout about it.

Moreover, when interrogating the details of the Budget, we can see some apparent shortcomings. For example, the Government committed to continuing the freeze on fuel duty in a bid to appease concerns from drivers. However, the visuals of freezing fuel duty while increasing the cap on bus fares, and the news that rail fares will increase by 4.6% next year may seem counter-intuitive – especially considering the impending net-zero transition.

Interestingly, the New Economics Foundation also detailed that updating the fuel duty could fund the £2 bus fare cap ten times over. Finally, when doing the media rounds this morning, Reeves noted that increasing taxes on businesses may have detrimental effects on pay increases for workers. Meanwhile, the Institute for Fiscal Studies explained that this Budget will only increase real household disposable income by 0.4%, if projected to the whole parliament. This feeds into arguments that a windfall tax on banks or a wealth tax may prove a better means to redistribute wealth.

Looking forward

Reeves’ Budget has proved relatively decisive on some of the key questions facing the Government. To some degree, this was inevitable with the UK economy facing a practical reckoning given the myriad of crosscutting challenges. Whether this be the highest tax burden since the Second World War, the highest level of national debt since the 1960s, the annual GDP growth slowing to 1.5% since the 2008 financial crash, or the decline in living standards over the last Parliament.

Knowing all this, Labour have still made the promise to make the UK the fastest growing economy in the G7. Therefore, something had to give to level with this promise and the UK’s wider economic predicament. Specifically, Reeves chose to focus on taxing business and tweaking the fiscal rules to allow for greater borrowing in an attempt to drive growth. With Reeves set to appear in front of the Treasury Select Committee next week, that session will provide a further read into how the Government grapples with the economic predicament.

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Was getting unemployed people into employment a key priority for the Conservative Government? Attempts included the New Back to Work Plan, former Prime Minister Rishi Sunak’s promise to tackle what he called ‘sick-note culture’, and choices for the Spring Budget in 2023, with the announcement of a £7 billion Employment package. However, despite policy initiatives, unemployment levels in the UK continue to be high.

Why is the employment ‘epidemic’ a growing problem, despite such initiatives?

According to the Office for National Statistics (ONS), 4.4% of people were unemployed between February and April 2024, equivalent to 1.44m people. Issues many unemployed are up against – long-term sickness, mental health problems, and early retirement, or caring responsibilities, inabilitities to find and retain jobs due to labour market demands, or gaps in skills and experiences required.

The problem of unemployment is growing. In most of the public sectors, such as health, social care, education, and the police force, there is a shortage of staff. Meanwhile, the Confederation of British Industry found that 38% of businesses reported that labour shortages were holding back their ability to invest and grow.

A look back at Conservative Government actions on unemployment

The New Back to Work Plan included a promise to implement tougher benefit sanctions for those not actively looking for work, trial possible reforms for the fit note process to make it easier and quicker for people to get specialised work and health support, and the launching of the WorkWell service.

Additionally, in April 2024, former Prime Minister Sunak gave a speech at the Centre for Social Justice (CSJ) on eliminating ‘sick note culture’, claiming it as a ‘lifestyle choice’ for those capable of working. Sunak’s intention to strip away the power GPs had to give sick notes sparked outrage within the charity and welfare sector, with the British Psychological Society stating that ‘the Prime Minister is taking the approach of attempting to minimise the mental health challenges […] The government should be prepared to invest the proper funds into mental health services.’

Labour’s plans to tackle the unemployment issue

With a new Labour Government established, with a different vision and different priorities, what is being said in regard to the unemployment epidemic? During the Labour campaigning period, the party promised a major programme of reform to support more people into work and bring the benefits bill down. In their manifesto, Labour has made ambitious promises, including reforming employment support with a system underpinned by rights and responsibilities. Furthermore, they have also stressed the importance of bringing Jobcentre Plus and the National Careers Service together to provide a national jobs and careers service.

In addition, Labour has made promises to help those with illnesses and disability into work, as they are more likely to face discrimination and structural barriers. Labour has promised to devolve funding so local areas can shape a joined-up work, health, and skills offer for local people. Moreover, parallel to the Conservative Government, Labour also proposed a Back to Work Plan within their first week of being in office. They plan to create new national jobs and career services; develop new work, health, and skills plans for the economically inactive, led by Mayors and local areas; and to introduce a Youth Guarantee to create more opportunities for training, apprenticeships, or help to find work for all young people aged 18-21 years old.

This growing epidemic needs to be at the heart of the welfare agenda for the new Government, given the pressures it is putting on public sector workers. Whether the initiatives announced so far can bring down the number of unemployed people, we are yet to discover.

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During the King’s Speech, an Employment Rights Bill was promised by the Labour Government. The Bill aims to deliver on policies set out in the Plan to Make Work Pay. Commitments in the plan include banning exploitative zero-hour contracts; ending fire and rehire; strengthening statutory sick pay; making parental leave, sick pay, and protection from unfair dismissal available from day one for all workers; and making flexible working the default from day one.

The Bill has not been introduced yet, but Labour have promised to introduce it within 100 days of entering Government. Ahead of that, this week, the Deputy Prime Minister Angela Rayner and Business Secretary Jonathan Reynolds convened a meeting with trade unions and business leaders to discuss the plans.

Looking at the attendance list, it appears that Ministers have tried to balance the competing interests of unions and businesses. Attendees included the Trades Union Congress, Unite, UNISON, Unite, and the GMB, along with business groups such as the CBI, the British Chambers of Commerce, the Federation of Small Businesses, and the Institute of Directors.

Trade unions welcomed the proposed changes, viewing them as a chance to improve pay and job security. The TUC General Secretary Paul Nowak welcomed the meeting as ‘an important chance for unions and businesses to discuss the shared gains that the government’s reforms will bring’.

However, business groups were more cautious and asked the Government not to rush without consultation on the specifics of the Bill. FSB’s Tina McKenzie, said she hopes they will ‘soon start a proper, meaningful and constructive engagement process as it moves from campaigning into practical policy making’. She also hopes ‘the Government starts to demonstrate it is prepared to try and reduce harm to employment, small business, and the economy from any and every negative impact of these proposals’. Similarly, CBI’s and IoD’s representatives also said further consultation would be crucial.

Finding a balance between competing interests will be a challenge for Labour to tackle in the next few months. According to a Government press release, ‘trade union and business representatives will be invited to continue engagement on the Plan to Make Work Pay via similar meetings, as well as share vital insights via the upcoming consultations’.

All of the proposals represent a considerable departure from current practices, and officials will have to think carefully about the detail, what exceptions may apply, how the reforms will work in practice, and how they will be implemented.

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In attempts to highlight its importance, Labour dedicated two pages of its manifesto to equalities in a section entitled ‘Respect and opportunity for all’. Here, they promised to ‘ensure [that] no matter whatever your background, you can thrive’. The King’s Speech proceeded to mention two bills relating to equalities; the Draft Equality (Race and Disability) Bill and the Draft Conversion Practices Bill.

The Draft Equality Bill aims to enshrine in law the full right to equal pay for disabled people and ethnic minorities. It will also introduce mandatory ethnicity and disability pay reporting for employers with over 250 employees. With the Draft Conversion Practices Bill, Labour have committed to extending the scope of the conversion therapy ban introduced by the last Government to make it trans-inclusive. The bill will work to introduce new criminal offences to target acts of conversion which are not covered by existing legislation.

The details of this have been quite vague so far – presumably because this issue remains controversial, and the party divided on transgender rights. Labour have said the ban would not extend to ‘legitimate psychological support, treatment, or non-directive counselling’, but it remains to be seen exactly how the Government plans on defining conversion therapy in the draft legislation.

Both of these bills build on promises that were laid out in the Labour manifesto, but there are areas in which the new Government has failed to deliver yet. One criticism being faced by the party is that despite having had Vicky Foxcroft as the Shadow Minister for Disabled People, Labour did not reserve this role for their new Government, instead splitting the remit into various departments. As such, Sir Stephen Timms was made Minister of State for Social Security and Disability in DWP and Stephen Kinnock is now Minister of State for Care (with responsibilities for overseeing disabilities and SEND) in DHSC. This also comes after Foxcroft publicly criticised the former government for not appointing a Minister to this role.

Fazilet Hadi, Head of Policy at Disability Rights UK, said that this approach ‘is problematic on so many levels’. Further to this, Hadi said that simply adding equality briefs to ministers who already have major operational duties signals that tackling inequality for those with protected characteristics is not central to Labour’s vision of a changed society.

Similarly, Labour has also failed, so far, to deliver on its promise to create a Department solely dedicated to Women and Equalities. At the 2023 Labour Conference, former Shadow Secretary of State for Women and Equalities Anneliese Dodds said: ‘If Labour wins the next election, I will become the UK’s first ever Secretary of State for Women and Equalities, with a seat at the top table, dedicated to advocating for women in all their diversity in every Cabinet conversation.’

Having held this position for nearly three years, many were baffled by the secrecy and the delay of the announcement – only to find out this role was abolished and the remit was split between Dodds and Bridget Phillipson – who both, again, have other ministerial responsibilities. According to i News, a Downing Street spokesperson denied that the role had been downgraded, and additionally the Fawcett Society, a high-profile charity for women, praised Starmer for appointing not just one, but two Ministers to the role.

With summer recess to soon draw to a close, the resumption of Parliament in the autumn will come as the true test for Starmer and his cabinet. It is to be seen how the opposition party may confront the redrafted Equality Bill, or may criticise the Government’s overall approach to tackling the issue of equalities.

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