The Chancellor’s Autumn Budget 2024 arrives at a pivotal moment for the United Kingdom. As the nation grapples with the aftermath of a global pandemic and ongoing economic uncertainties, the government’s fiscal decisions bear significant weight on the country’s future.
One cannot overlook the commendable steps taken in increasing public investment and providing support for the most vulnerable. These measures represent decisive action toward stimulating economic growth and fostering social equity. However, the Budget seems to overlook the needs of middle-income earners and places a significant burden on businesses.
The government’s commitment to increasing public investment to over £100 billion in the next five years is a bold and necessary move. This investment, averaging 2.6% of GDP over the Parliament, addresses the long-standing underinvestment in the UK’s infrastructure. Projects such as the development of East West Rail, connecting Oxford, Milton Keynes, and Cambridge, are set to unlock housing opportunities and bolster the life sciences sector. The Transpennine Route Upgrade lays the groundwork for Northern Powerhouse Rail, enhancing connectivity and economic integration in the North.
Housing initiatives are also a focal point, with an ambitious plan to build 1.5 million homes addressing the housing shortage and aiming to make housing more affordable. An additional £500 million boost to the Affordable Homes Programme is expected to build up to 5,000 additional affordable homes. These measures are anticipated to have a significant multiplier effect, generating economic activity that extends beyond the initial spending.
Moreover, protecting record levels of government research and development investment, with £20.4 billion allocated in 2025-26, supports innovation and positions the UK at the forefront of emerging industries. This includes significant funding for life sciences, aerospace, and clean energy sectors, which are vital for future-proofing the economy.
The Budget also demonstrates a genuine effort to support the most vulnerable populations. Extending the Household Support Fund with an additional £1 billion allocated for 2025-26 shows a commitment to assisting those most in need. Local authorities can use these funds to support vulnerable households with essentials such as food, utilities, and housing costs, preventing individuals from falling into severe poverty amid rising living costs.
Increasing the Carer’s Allowance earnings limit to the equivalent of 16 hours at the National Living Wage is a significant step in recognising the invaluable contributions of unpaid caregivers. This change allows over 60,000 more carers to access Carer’s Allowance without sacrificing additional income, providing greater financial security and flexibility. Additionally, raising the National Living Wage by 6.7% to £12.21 per hour from April 2025 benefits over three million low-paid workers across the UK, enhancing their purchasing power and helping them afford necessities more comfortably.
An integral aspect of the Autumn Budget 2024 is its substantial investment in public services, which is a commendable effort to strengthen the social fabric of the nation. The government’s commitment to enhancing public services reflects an understanding that a robust economy is underpinned not just by financial metrics but by the well-being and productivity of its citizens.
The NHS stands as a cornerstone of public welfare in the UK, and the Budget’s allocation of an additional £22.6 billion from 2023-24 to 2025-26 is a significant endorsement of its value. This investment aims to reduce waiting times by supporting the NHS to deliver 40,000 extra elective appointments a week, making progress toward the commitment that patients should expect to wait no longer than 18 weeks from referral to treatment. Such a commitment is crucial, especially in the wake of the pandemic, which has placed unprecedented strain on healthcare services.
Education is another critical area where the Budget demonstrates strong support. The Department for Education will see resource spending increase by £11.2 billion from 2023-24 levels by 2025-26. This includes increasing funding for the core schools budget by £2.3 billion, with £1 billion allocated to support the special educational needs and disabilities (SEND) system. Such investments are vital for ensuring that all children, regardless of their background or abilities, have access to high-quality education.
These substantial investments in public services are laudable. By prioritizing healthcare, education, and infrastructure, the government is addressing fundamental areas that directly impact the quality of life for millions of people. Such commitments are essential for promoting social well-being, economic productivity, and long-term prosperity.
However, while these measures are laudable, the Budget appears to overlook the challenges faced by middle-income earners. The continuation of the freeze on the personal allowance and higher-rate threshold, albeit until April 2028, means that as wages increase due to inflation or annual pay raises, more middle-income earners will be pushed into higher tax brackets—a phenomenon known as “fiscal drag.” This results in a larger portion of their income being taxed at a higher rate, effectively increasing their overall tax bill even if their real income hasn’t increased significantly. Whilst the Chancellor has signalled a planned move away from this, income tax bands have been frozen since 2021/22, and have already dragged over 4 million people into paying income tax, and 1.6 million into the 40% tax bracket, compared to 2021.
Middle-income households are not immune to the rising costs of essentials such as food, energy, and housing. Without targeted support or adjustments to tax thresholds, these households may experience a financial squeeze that affects their quality of life and economic participation. Reduced disposable income among this group may lead to decreased consumer spending, which can dampen economic growth and recovery efforts.
The increased burden on businesses, particularly SMEs, is another area of concern. From April 2025, employers will face a 1.2 percentage point increase in National Insurance contributions, raising the rate to 15%. Additionally, the threshold at which employers start paying National Insurance will be lowered from £9,100 to £5,000. This means that more employers, including small businesses, will begin paying National Insurance, increasing their operational costs.
SMEs, which are the backbone of the UK economy, may struggle to absorb these additional costs. Higher employment expenses could discourage businesses from expanding their workforce or force them to reduce existing staff levels. To manage costs, businesses may be unable to offer competitive wages or raises, affecting employee morale and retention. Increased operational expenses may also result in higher prices for goods and services, contributing to inflationary pressures.
While the increase of the Employment Allowance to £10,500 and the expansion of eligibility by removing the £100,000 eligibility threshold are positive steps, they may not sufficiently offset the increased National Insurance burden for all businesses. Larger businesses or those just above the new threshold may still face significant challenges, potentially hindering investment and growth at a time when economic recovery is paramount.
The Autumn Budget 2024 presents a multifaceted plan aimed at rebuilding Britain and stimulating economic growth during an exceptionally challenging time. Crafting a budget under such circumstances is undoubtedly difficult, and it is commendable that the government has largely protected individuals from direct tax increases, especially after the high cost of living experienced in recent years. Their efforts to increase public investment and provide support for the most vulnerable reflect a commitment to fostering recovery and promoting social equity.
However, the necessity to raise substantial funds to support public expenditure has led to decisions that may have unintended consequences. While the government’s tough choices are understandable, it is crucial to consider the potential impact on middle-income earners and businesses. The increased burdens placed on certain groups could hinder economic growth and undermine the very recovery the Budget seeks to promote.