NHS, schools, houses and the biggest tax rises since 1993: The key takeaways from the Budget

The chancellor has unveiled the biggest tax-raising budget since 1993, as she pledged major boosts for the NHS, education, housing and transport, as ITV News Deputy Political Editor Anushka Asthana reports.

Words by ITV News Politics Producer Elisa Menendez

Rachel Reeves has delivered her long-awaited Budget which will increase taxes by £40 billion - the biggest tax-raising fiscal event in more than 30 years.

The government hopes the historic Budget - Labour's first since 2010 and the first delivered by a female chancellor - will convince the public that it can "rebuild Britain" and restore its creaking public services, with pledges to "invest, invest, invest".

Reeves began delivering her speech by saying she was "deeply proud" to be the first female chancellor in the 800-year history of the role, telling young girls there should be “no ceiling on your ambitions”.

She went on to promise to put "more pounds in people's pockets" and vowed to end austerity - but warned she had to make "difficult decisions" to find billions to fix the public's finances.

Higher taxes and more borrowing were necessary to rebuild stretched public services and plug the £22 billion black hole she claims the Tories left in their wake, Reeves insisted, warning: "The scale and seriousness of the situation that we have inherited cannot be underestimated."

The chancellor repeated Labour's manifesto pledge that the taxes won't hurt "working people" as she committed not to raise VAT, income tax and national insurance by instead increasing taxes on businesses.

But critics and opposition MPs have already argued that such hikes will indirectly affect employees and accused Labour of breaching its manifesto promises, with the Tories claiming the party "lied" to the public about tax rises to win the election.

Leader of the Opposition Rishi Sunak hit out at the plans, describing them as a "tidal wave of anti-business" measures, as well as "higher taxes, higher borrowing, no plan for growth, and working people paying the price".

He accused Reeves of “fiddling the figures” by changing the debt target, adding: “The reason the chancellor has increased borrowing and increased taxes is because she has totally failed to grip public spending.”

Among the rises were a hike to employer national insurance contributions, capital gains tax, and applying VAT to private school fees, which she said will help fund major cash injections for the NHS, education, housing and transport.

And changing the way government debt is measured allowed her greater flexibility to borrow, resulting in what the Office for Budget Responsibility (OBR) called “one of the largest fiscal loosenings of any fiscal event in recent decades”.

The tax burden will reach 38.3% of gross domestic product (GDP) in 2027-28, the highest since 1948 as the UK recovered from the impact of the Second World War.

Paul Johnson, director of economic think tank the Institute for Fiscal Studies, said the Budget would deliver a “short-term sugar rush” for the economy as a result of the “debt-financed spending splurge”.

But, he added: “Somebody will pay for the higher taxes – largely working people.”

• Taxes

Employer national insurance contributions

Reeves announced an increase to national insurance employer contributions by 1.2 percentage points to 15%, which will come into effect from April 2025, she confirmed.

She also lowered the Secondary Threshold, the level at which employers start paying national insurance on each employee’s salary, from £9,100 per year down to £5,000.

"I know that this is a difficult choice. I do not take this decision lightly," she said, pointing out that this will raise a huge £25 billion per year.

To protect small businesses, she announced employment allowance will rise from £5,000 to £10,500.

However, she confirmed that the retail, hospitality and leisure industry will receive 40% relief on business rates from 2025/26.

Capital gains tax

The chancellor also announced she will raise the lower rate of capital gains tax (CGT) to 18%, up from 10%, while the higher rate will increase to 24% from 20% previously.

CGT is charged on profit from selling an asset that has increased in value, such as stocks that are not held in an ISA, or a second home. The tax applies to individuals, but also to company owners, partners in a business, and self-employed people, among others.

Private school VAT

The private school VAT exemption will be scrapped from 2025, which the government says will help pay for thousands more teachers at state schools.

As of January 1, private schools must pay VAT on their fees. She also removed business rates relief from those schools from April 2025.

Non-dom, inheritance and windfall taxes

The non-dom tax regime will be abolished from April 2025 to "remove the outdated concept of domicile from the tax system".

"I have always said that if you make Britain your home, you should pay your tax here," the chancellor insisted.

Meanwhile, there will be an increase to the windfall tax on oil and gas profits to 38%.

The inheritance tax threshold freeze will also be extended for a further two years to 2030, and pensions that are passed on when somebody dies will be taxed similarly to other inherited assets in the future.

Reeves vowed to close the “loophole” around inherited pensions by bringing them under the inheritance tax (IHT) regime from April 2027. Pensions are currently exempt from IHT and are not included as part of someone’s estate when they die.

John O’Connell, chief executive of the TaxPayers’ Alliance, said the move to levy IHT on private pension inheritance "is a particularly cruel and capricious means of raising revenue and will only add to the sense that tax liabilities upon death are scarcely more sophisticated than a game of Russian roulette.

“Rachel Reeves should abandon this policy before it wreaks havoc on family finances.”

Reeves said the reform, combined with tweaks to tax relief around inherited agricultural and business property, would raise £2 billion in total.

Fury from farmers: Analysis from ITV News Political Correspondent Carl Dinnen

Farmers are aghast at the chancellor's changes to inheritance tax.

Today, she said farms worth more than £1 million would start to incur the tax. Although £1 million is a lot of money, it does not necessarily get you a lot of farm. And more importantly it doesn't mean a farm is profitable enough to pay a large inheritance tax bill.

Tom Bradshaw, the President of the National Farmer's Union, said: "It's clear the government does not understand, or perhaps doesn't care, that family farms are not only small farms, and that just because a farm is a valuable asset it doesn't mean those who work it are wealthy."

Farmers say there is now a danger that more and more small family farms cannot be handed on from one generation to the next and are forced to sell up leading, in the long run, to farming in Britain being the preserve of big agri-businesses.

• Income

In a surprise move, the chancellor confirmed there will be no extension of the freeze on the thresholds for income tax and national insurance beyond the decisions of the previous government.

Between 2028-2029, personal tax thresholds will be uprated in line with inflation, she confirmed.

She also announced the minimum wage will increase by 6.7% from £11.44 to £12.21 per hour from April, while for 18-20-year-olds, it will rise by 16.3% from £8.60 to £10.

• NHS

The chancellor confirmed a £22.6 billion increase in the day-to-day health budget, as well as a £3.1 billion increase in the capital budget over this year and next.

Reeves said Labour hopes this will help reduce the 6.7 million-long waiting list and provide new surgical hubs and modern equipment, such as scanners.

"This is the largest real-terms growth in day to day NHS spending outside of Covid since 2010," she said.

"Many NHS buildings have been left in a state of disrepair," she continued. "So we will provide £1 billion of health capital investment next year to address the backlog of repairs and upgrades across the NHS estate.

"To increase capacity for tens of thousands more procedures next year we will provide a further £1.5 billion for new beds in hospitals across the country, new capacity for over a million additional diagnostic tests and new surgical hubs and diagnostic centres so that those people waiting for their treatment can get it as quickly as possible."

ITV News Political Correspondent Harry Horton takes a look at the funding urgently needed for the creaking overstretched health service, the crumbling schools and Britain's outdated railway network

• Fuel, alcohol, tobacco and vapes

In a surprise move, the chancellor insisted there will be "no higher taxes at the petrol pumps next year" as she announced the freeze on fuel duty will continue, including maintaining the existing 5p cut.

While alcohol duty rates on non-draught products will increase in line with RPI inflation, she'll cut draught duty by 1.7% "taking a penny off pints at the pub", Ms Reeves said, while the soft drinks industry levy will be increased to account for inflation.

The chancellor also confirmed the government will introduce a flat-rate duty on all vaping liquid from October 2026 and a one-off increase in tobacco duty.

• Welfare

A raft of welfare reforms will be introduced, with Reeves promising a "crackdown" on benefit fraud and pledging £240 million for new projects to get more people back to work.

She said the government will soon publish details of its “Get Britain Working” White Paper, which aims to tackle the root causes of why so many people are out of work "with an integrated approach across health, education and welfare".

Labour's plan to carry on with reforms previously announced by the Conservatives to save £3 billon has been branded “bitterly disappointing” by anti-poverty charity Z2K, as they expect disabled people living in poverty to “bear the brunt of these cuts”.

Under Conservative proposals, welfare eligibility would have been tightened so that around 400,000 more people who are signed off long-term would be assessed as needing to prepare for employment by 2028/29, reducing the benefits bill by an estimated £3 billion.

With detail on the reforms not expected until 2025, James Taylor, executive director of strategy at disability equality charity Scope, said “disabled people are yet again in the dark about the future of the benefits system, creating a huge amount of anxiety”.

Meanwhile, an increase to the Carer’s Allowance weekly earnings limit to the equivalent of 16 hours at the National Living Wage – described by Reeves as the largest increase since the allowance was introduced in 1976 – has been welcomed by charities.

The new limit, meaning a carer can now earn more than £10,000 a year while receiving the allowance, will allow some 60,000 more carers access to the financial help, the government said.

The Carers Trust said the move offers hope to many, and insisted it must be among “the first steps towards a desperately needed overhaul of this totally inadequate benefit”.

• Transport

There were a host of public transport measures announced aimed at boosting connectivity across the country, along with road improvements with £500 million in funding to repair potholes.

Reeves confirmed the government is “committing the funding required” to begin tunnelling work to bring HS2 to London Euston station.

She also confirmed the government will also secure the delivery of the Trans-Pennine upgrade to connect York, Leeds, Huddersfield and Manchester, as well as the East-West Rail to drive growth between Oxford, Milton Keynes and Cambridge.

The £2 bus fare cap will also rise to £3 until the end of 2025, she confirmed.

While there will be £1.3 billion to improve connectivity in England's city regions, funding projects like the Brierley Hill Metro extension in the West Midlands, the renewal of the Sheffield Supertram and West Yorkshire Mass Transit, including in Bradford and Leeds.

Have you heard our podcast Talking Politics? Tom, Robert and Anushka dig into the biggest issues dominating the political agenda in every episode…

• Housing

Reeves also confirmed £5 billion of investment will help fund Labour's manifesto pledge to build 1.5 million homes over the course of this Parliament.

Some £500 million will fund the building of new social housing properties, and a further £128 million for three new projects to build more homes - some of which will be energy efficient.

"We will provide £3 billion of support in guarantees to boost the supply of homes and support our smaller housebuilders," she said.

"And we will provide investment to renovate sites across our country, including at Liverpool Central Docks, where we will deliver 2,000 new homes, and funding to help Cambridge realise its full growth potential."

But second-home buyers will face a stamp duty land tax surcharge rise of two percentage points – to 5% – starting from Thursday.

She said the government will also make progress on their commitment to "accelerate the remediation of homes following the findings of the Grenfell Inquiry, with £1 billion of investment to remove dangerous cladding next year”.

• Education

Reeves pledged to improve crumbling school buildings “not fit for our children” as she unveiled billions of extra spending for education.

The core schools budget will rise by £2.3 billion next year to support the recruitment of 6,500 new teachers in England, the government has said.

A Treasury document said £1 billion of this funding will go towards supporting the special educational needs and disabilities (Send) system.

She also promised £1.4 billion to help rebuild schools and £2.1 billion to improve school maintenance to ensure all “children can learn somewhere safe”, as well as an additional £300 million for further education (FE) and a “tripling” of investment in breakfast clubs to give every child “the best possible start to the school day”.

• Contaminated blood and Horizon victims

She also announced that victims of the infected blood and Horizon scandals will receive compensation in full, with £11.8 billion for all "infected and affected" by contaminated blood, and £1.8 billion for victims of the Post Office scandal.

• Defence

There will be a total increase to the Ministry of Defence’s budget of £2.9 billion next year, she confirmed, telling MPs: “Ensuring the UK comfortably exceeds our Nato commitments and providing guaranteed military support to Ukraine of £3 billion per year, for as long as it takes.”

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