"UK Autumn Budget 2024: Key Tax Changes, Wage Increases, and Public Spending Explained"

The UK Government's Autumn Budget 2024, announced by Chancellor Jeremy Hunt, is structured around balancing fiscal prudence with targeted investments in critical areas, including housing, employment, tax reform, and green initiatives. Each element of the budget is tailored to address ongoing economic pressures while working to stabilize public finances.

1. Fiscal Goals and Economic Growth Targets

• Balancing the Budget by 2029/30: The budget sets stringent fiscal targets, aiming to balance the government’s current budget by the end of the decade while also reducing the public sector's net financial liabilities relative to GDP. This approach stems from the need to manage high levels of debt and curb inflation. The Office for Budget Responsibility (OBR) has projected that these measures, alongside anticipated economic growth, will gradually reduce debt as a proportion of GDP​
• GDP Growth Forecasts: The OBR forecasts an increase in GDP growth to 2% in 2025, largely driven by heightened government investment and public spending. However, growth is expected to moderate in the longer term, gradually stabilizing at approximately 1.5% annually from 2027 onwards. This conservative outlook reflects challenges such as an aging population and persistent inflationary pressures​

2. Public Spending Increases

• Departmental Budget Increases: The budget outlines a £33 billion increase in departmental spending for the 2024-2026 period. The Department of Health and Social Care, which faces intense demand from an aging population and a backlog of cases post-COVID, is one of the primary beneficiaries. Investment will focus on hiring more healthcare staff, improving medical infrastructure, and reducing wait times​
• Education and Local Government Funding: The education sector is also prioritized, with additional funds earmarked for teacher salaries, school maintenance, and resources to support pupils with special needs. Meanwhile, local councils will receive increased funding to enhance community infrastructure and services, with a focus on public housing and urban development initiatives​
• Public Investment Limits: The government has set caps on public investment, with a planned £14.7 billion boost in infrastructure and development projects over the next two years. These limits are intended to avoid excessive borrowing while still funding critical projects in transportation, healthcare, and housing​

3. Labor Market and Employment Measures

• Increase in National Living Wage and Minimum Wage: The budget introduces the largest increase in minimum wage rates in UK history, aiming to improve living standards amid rising inflation. Starting in April 2025, the National Living Wage for workers aged 21 and older will rise to £12.21 per hour. The National Minimum Wage rates for younger workers and apprentices will also see significant increases. This move reflects the government’s goal to lift incomes and support low-wage earners in light of high living costs​
• Employer National Insurance Contributions (NIC): Employer NIC rates will increase by 1.2 percentage points to 15% starting in April 2025, while the earnings threshold above which NIC is payable will decrease to £5,000. This adjustment raises the cost for employers but is partially offset by an increase in the Employment Allowance, which will double to £10,500. This expanded allowance aims to ease NIC burdens on smaller businesses, allowing them to retain more earnings for reinvestment​
• Support for Small Businesses: The Employment Allowance increase is part of a broader strategy to support small businesses and startups. By removing the prior qualifying requirement and expanding the allowance to £10,500, the government aims to make this relief more accessible, ensuring that smaller employers can sustain their payroll obligations under the new NIC rates​

4. Housing Initiatives and Affordable Homes Programme

• Affordable Homes Programme Expansion: An additional £500 million will be allocated to the Affordable Homes Programme in 2025/26. This expansion aims to address the housing shortage, particularly affecting lower-income households and key workers in urban areas. The funding will support local councils and developers in creating more affordable housing units, with a focus on areas of high demand​
• Right to Buy Scheme: Under reforms to the Right to Buy scheme, local councils can retain 100% of proceeds from public housing sales. This funding can then be reinvested in building new housing. The budget encourages councils to prioritize these funds for the creation of affordable units, aligning with the government’s broader housing goals​
• Regeneration and Urban Development: In addition to affordable housing, there will be funding for regeneration projects aimed at revitalizing urban areas, particularly in economically disadvantaged regions. This includes incentives for developing brownfield sites, which can alleviate housing demand without expanding into greenbelt land​

5. Tax and Financial Reforms

• VAT and Private School Fees: In a significant policy shift, the budget extends VAT to private school fees, effectively removing charitable rates relief for these institutions. This measure aims to generate additional tax revenue while addressing concerns about educational inequality​
• Crypto asset Reporting Framework (CARF): The UK will implement the OECD’s Crypto asset Reporting Framework from January 2026. Under this framework, crypto providers will need to report details of user transactions to tax authorities, primarily focusing on foreign taxpayers but including domestic reporting. This measure reflects the government’s efforts to enhance transparency and combat tax evasion in the digital asset market​
• Reforms to the Common Reporting Standard (CRS): Although domestic reporting requirements have been postponed, other adjustments to the CRS will proceed, enhancing transparency in international finance. These changes support the government’s larger goal of tax compliance and alignment with global financial reporting standards​

6. Green Infrastructure and National Wealth Fund Investments

• National Wealth Fund for Green and Social Projects: Although specifics on funding allocation remain limited, the government’s National Wealth Fund will prioritize infrastructure projects with social and environmental impacts. This includes potential investments in renewable energy, public transportation improvements, and green building initiatives. The goal is to advance sustainable development while meeting climate targets and fostering job creation in green industries​
• Future Environmental and Social Initiatives: The government hinted at further measures to support its environmental goals, likely focusing on green finance, sustainable agriculture, and waste reduction policies. These are expected to be explored in subsequent budgets or as part of broader legislative initiatives​

7. Office for Budget Responsibility (OBR) and Economic Context

• The OBR provided a nuanced economic outlook, acknowledging that while GDP is expected to grow in the near term, the UK economy faces medium- to long-term challenges due to structural issues such as an aging population and inflation. Higher energy costs and supply chain disruptions are also contributing to persistent inflationary pressures​
• Public Borrowing: Public borrowing is projected to rise to £127 billion in 2024/25, a figure the government hopes to reduce over time with more controlled spending and economic growth. This budget, therefore, attempts a careful balancing act, addressing immediate fiscal pressures without extensive new borrowing​