What does the Autumn Budget mean for Greater Birmingham Businesses?

What is the Autumn Budget?

On 30 October 2024, the Chancellor of the Exchequer, Rachel Reeves, presented the Autumn Budget to the House of Commons. It reviews the UK’s economy and sets out the Government’s Fiscal policy for the year. This is the first time since 2009 that a budget has been delivered by a Labour Chancellor.

Public Finances

Fiscal stability was a key theme of the speech, and the Chancellor announced that the Government will accept all 10 recommendations in the Office for Budgetary Responsibility (OBR)’s review of the March 2024 forecast for Departmental Expenditure Limits, including improving the transparency and consistency of the spending information the Treasury shares with the OBR. It was stated that the Government will publish details of the previously referenced “£22bn black hole” in in-year spending pressures and that planned tax increases are expected to raise £40 billion in additional revenue to address this.

The Government has committed to retaining the Bank of England’s 2 per cent inflation target and to abiding by the fiscal rules of the Office for Budgetary Responsibility, with this year's budget meeting the following rules:

• Stability rule: to move the current budget into balance so that revenues meet day-to-day spending.
• Investment rule: to reduce net financial debt as a share of the economy.

The deficit forecast is set to be £55.5 billion in 2024-25, with a surplus achieved by 2027-28 estimated to be around £10.9 Billion.

Policies announced in the budget are anticipated to increase spending by £70 billion (2 per cent of Gross Domestic Product) over the next 5 years, including an extra £100 billion of capital investment (£13 billion to be invested next year). 

The Chancellor also stated the introduction of five-year capital budgets to provide more long-term certainty in spending and projects, with reviews every two years. Procurement will also change with the introduction of a new Office for Value for Money (OVfM), which will review public tenders to ensure a fairer deal for taxpayers.

The OBR forecasts that as a result of this budget, the economy will grow by 1.1 per cent in 2024 and 2 per cent in 2025, varying between 1.5 per cent and 1.8 per cent for the rest of the current Parliament.

Business taxation:

Corporation Tax

The Corporate Tax Roadmap confirms the main Corporation Tax rate will be capped at 25 per cent for the duration of this Parliament, maintaining one of the lowest rates in the G7.

National Insurance

The Chancellor announced that employers’ National Insurance contributions will increase by 1.2 percentage points to 15 per cent from April 2025. Employers will also face a reduced per-employee threshold at which they will be liable to pay National Insurance (the secondary hreshold) reduced from £9,100 to £5,000. While employees will not see their National Insurance contributions increase at the present time, from 2028/29 the government will increase personal tax thresholds on income tax and national insurance in line with inflation.

Businesses will get an increase in the employment allowance from £5,000 to £10,500, which means that eligible firms will receive an elevated discount, and the government has waived the minimum threshold of £100,000 to be eligible for this relief. This means that 865,000 businesses will pay no National Insurance contributions at all, and more than half of employers will either see no change or will gain overall next year.

Business Rates

On business rates, the Chancellor announced that small business multiplier in England will be frozen at 49.9p for 2025/26, while the standard multiplier will be uprated by the September 2024 CPI rate to 55.5p. Businesses operating within the retail, hospitality and leisure sectors will immediately benefit from 40 per cent relief and will have a permanently lower multiplier from 2026/27. Private schools will see their business rates relief revoked as of April 2025.

Energy Profits Levy

The budget stated that the Energy Profits Levy will increase by 3 percentage points to 38 per cent, and the levy will now apply until 31st March 2030. The investment allowance will be abolished, and the rate of decarbonisation allowance will be set at 66 per cent so its cash value can be maintained

Business Investment:

Supporting High-Growth Sectors

The Government stated that National Wealth Fund will support up to £70 billion in private investment, aligning with a 10-year Industrial Strategy that will provide stability across growth-driving sectors. Funding will target advanced manufacturing and green industries, for example, the aerospace sector is expected to receive £975 million in R&D funding over five years, and the automotive industry is expected to receive £2 billion in R&D funding over the same period to support the manufacturing of zero emissions vehicles. It is anticipated that £520 million will be allocated to a new Life Sciences Innovative Manufacturing Fund to drive growth and build resilience for future health emergencies. The Chancellor set out that the creative industries will benefit from tax reliefs which will generate £15 billion of support over the next five years.

Supporting Small Businesses

The Department for Business and Trade (DBT) is set to receive over £3.3 billion by 2025-26, which includes over £1 billion directed towards the British Business Bank. This funding will enhance access to finance for small businesses, supporting initiatives such as the Start-Up Loans and Growth Guarantee Scheme.

This coincides with the government planning to formulate a Small Business Strategy Command Paper in 2025 which will set out the government’s vision for supporting small businesses by boosting scale-ups, creating thriving high streets and opening up overseas.

People & Skills

Reducing economic inactivity

Through this budget, the Government is providing significant capital investment in health to deliver capacity for more diagnostic and surgical procedures and to help reduce the elective waiting list in England, with the ambition that this will support more people into work.

The Budget also provides an additional £1.8 billion to continue the expansion of government-funded childcare support for working parents in England, bringing total spending on childcare to over £8 billion in 2025-26. The OBR forecast that this will support an additional 60,000 individuals to enter work by 2028. Further, the Chancellor committed to £15 million to begin delivery of the pledge to create 3,000 new or expanded nurseries through upgrading space in primary schools, and investment of over £30 million in the rollout of free breakfast clubs next year, to fund breakfasts in thousands of schools and help working parents.

It is anticipated that reviews of the parental and carer’s leave systems will offer further opportunities to better support women and working families.

As part of an anticipated Get Britain Working White Paper (due to be published shortly), the government has announced it will be investing £240 million to trial new ways of getting people back into work. The government plans to test new approaches and collect evidence on effective ways to tackle the root causes of ill-health related inactivity, support young people who are ‘not in education, employment or training’ (NEET), and help people to develop their careers.

The Government has also announced plans to invest £115 million in 2025-26 to deliver Connect to Work, a new supported employment programme matching people with disabilities or health conditions into vacancies and supporting them to succeed in their roles. It is expected that local authorities will be able to tailor delivery of Connect to Work in ways that meet their local needs and Greater Manchester and West Midlands Combined Authorities will receive even greater flexibilities, with funding included in their Integrated Settlement.

Further, the Government has also announced its intentions to set out reforms to the health and disability benefits system early in 2025 to ensure the system supports people who can work to remain in or start work, in a way that is fair and sustainable.

The Government is particularly interested in increasing women’s labour market participation, estimating that equalising women’s participation rates with those of men would add 1.3 million people of working age to the workforce. This is something they are looking to address through measures already announced in Make Work Pay, as well as childcare reforms and from April 2025, increasing the Carer’s Allowance weekly earnings limit from £151 a week to the equivalent of 16 hours at the National Living Wage, to improve financial security for carers to support them into work or to work more hours if they choose.

Boosting Skills

Further to the establishment of Skills England earlier this year, the Chancellor has announced an additional £300 million in funding for further education in England to support colleges to maintain, improve and ensure suitability of their estate, and £2.3 billion of additional funding for the core schools budget, which increases per pupil funding in real terms.

The Government reiterated that it will also take steps to transform the Apprenticeship Levy into a more flexible Growth and Skills Levy, with investment of £40 million committed to help to deliver new foundation and shorter apprenticeships in key sectors. The Government has said that this reformed levy will be developed in partnership with employers, providers, and learners, and that Skills England will consult with a wide range of partners to ensure that levy-funded training meets needs and secures good value for money.

The Government also announced provision of £6.7 billion of capital funding in 2025-26 for education in England, a real terms increase of 19 per cent from 2024-25. This includes £1.4 billion for the school rebuilding programme, an increase of £550 million on this year. The settlement also invests over £2 billion into maintenance for schools and £950 million for skills capital.

Through a Department for Culture, Media and Sport (DCMS) settlement, the Government has also committed to funding an expansion of the Creative Careers Programme, worth £3 million, to build on its success in raising awareness of career routes and tackling skills gaps in this key sector.

Wages and Pensions

From April 2025 the Government has announced that National Living Wage will increase to £12.21 per hour for all eligible employees, and the National Minimum Wage for 18-20 year olds will increase to £10.00 per hour for all eligible workers.

The Government has stated an intention, over time, to create a single adult wage rate, and with this in mind, is also increasing the minimum wages for Under 18s and Apprentices to £7.55 per hour. The Accommodation Offset rate will increase to £10.66 a day.

The Chancellor also announced that the Government will maintain the State Pension Triple Lock for the duration of this Parliament. The basic and new State Pension will increase by 4.1 per cent in 2025-26, in line with earnings growth, and working age benefits will be uprated in full in 2025-26 by the September 2024 Consumer Price Index (CPI) inflation rate of 1.7 per cent.

Personal Taxation

The Chancellor announced that the temporary 5p cut in fuel duty rates will be extended by 12 months and will expire on 22 March 2026. The planned inflation increase for 2025/26 will also not take place.

The Government made a number of announcements in regards to inheritance tax. Most notably, the current inheritance tax threshold freezes, due to expire in April 2028, will be extended for a further two years to April 2030, and the opportunity for individuals to use pensions as a vehicle for inheritance tax planning will be removed, by bringing unspent pots into the scope of inheritance tax from April 2027, which will affect around 8 per cent of estates each year.

The lower and higher main rates of Capital Gains Tax will increase to 18 per cent and 24 per cent respectively for disposals made on or after 30 October 2024. The rate for Business Asset Disposal Relief and Investors’ Relief will increase to 14 per cent from 6 April 2025, and will increase again to match the lower main rate at 18 per cent from 6 April 2026. The new rates will be legislated in Finance Bill 2024/25. Further, from April 2026, carried interest will be taxed fully within the Income Tax framework, with bespoke rules to reflect its unique characteristics. Ahead of this, the Capital Gains Tax rates currently applied to carried interest will be increased to 32 per cent from April 2025.

The Government also announced plans to legislate to abolish the remittance basis of taxation for non-UK domiciled individuals and replace it with a simpler and internationally competitive residence-based regime, which will take effect from 6 April 2025. Individuals who opt-in to the regime will not pay UK tax on foreign income and gains (FIG) for the first four years of tax residence. From 6 April 2025 the government will introduce a new residence-based system for Inheritance Tax (IHT), ending the use of offshore trusts to shelter assets from IHT, and scrap the planned 50 per cent reduction in foreign income subject to tax in the first year of the new regime. For Capital Gains Tax purposes, current and past remittance basis users will be able to rebase personally held foreign assets to 5 April 2017 on a disposal where certain conditions are met. Overseas Workday Relief will be retained and reformed, with the relief extended to a four-year period and the need to keep the income offshore removed. The amount claimed annually will be limited to the lower of £300,000 or 30 per cent of the employee’s net employment income. The Government is extending the Temporary Repatriation Facility to three years, expanding the scope to offshore structures, and simplifying the mixed fund rules to encourage individuals to spend and invest their FIG in the UK.

For 2026-27, the Chancellor also announced that the Government will increase rates of Air Passenger Duty (APD). This equates to £1 more for those taking domestic flights in economy class, £2 more for those flying to short-haul destinations in economy class, £12 for long-haul destinations, and relatively more for premium economy and business class passengers. The higher rate, which currently applies to larger private jets, will rise by a further 50 per cent in 2026-27. From 2027-28 onwards, all rates will be uprated by the forecast Retail Prices Index and rounded to the nearest penny. The Government is also consulting on extending the scope of the APD higher rate to capture all passengers travelling in private jets already within the APD regime.

From 31st October 2024 it was announced that the Higher Rates for Additional Dwellings (HRAD) surcharge on Stamp Duty Land Tax (SDLT) will be increased from 3 per cent to 5 per cent. The Government’s ambition is that this will provide those looking to move home, or purchase their first property with a comparative advantage over second home buyers, landlords, and businesses purchasing residential property.

As anticipated, the Chancellor also announced that the Government will further introduce 20 per cent VAT on education and boarding services provided for a charge by private schools from 1st January 2025. The Government will also remove business rates charitable rate relief from private schools in England from April 2025. To support pupils with special educational needs that can only be met in a private school, local authorities and devolved governments that fund these places will be compensated for the VAT they are charged on those pupils’ fees. Private schools which are “wholly or mainly” concerned with providing full time education to pupils with an Education, Health and Care Plan will remain eligible for business rates charitable relief.

The Government announced plans to cut alcohol duty rates on draught products below 8.5 per cent alcohol by volume (ABV) by 1.7 per cent, so that an average ABV strength pint will pay 1p less in duty, to increase the discount provided to small producers for non draught products, and to maintain the cash discount provided to small producers for draught products, increasing the relative value of Small Producer Relief. Alcohol duty rates on non-draught alcoholic products will increase in line with RPI inflation. These measures will take effect from 1 February 2025. The current temporary wine easement will also end as planned on 1 February 2025.

The Government also stated that the tobacco duty escalator will be renewed at RPI+2 per cent on all tobacco products until the end of this Parliament. To reduce the gap with cigarette duty, the rate on hand-rolling tobacco will increase by a further 10 per cent this year. These changes will take effect from 6pm on 30^th October 2024 and will be included in Finance Bill 2024-25. A flat-rate excise duty on all vaping liquid will also be introduced from 1st October 2026 at £2.20 per 10ml vaping liquid, accompanied by an equivalent one-off increase of £2.20 per 100 cigarettes / 50g of tobacco in tobacco duty to maintain the financial incentive to switch from tobacco to vaping.

Transport and Infrastructure

The Chancellor announced in the budget that the Government will establish a National Infrastructure and Service Transformation Authority (NISTA), aiming to drive more effective delivery of infrastructure across the country. Alongside existing assurance mechanisms, NISTA is expected to have an enhanced role in supporting major projects, including validating business cases prior to HM Treasury funding approval.

Key transport and infrastructure projects that the Government has committed to include:

• East West Rail, connecting Oxford, Milton Keynes and Cambridge – in an effort to unlock transformational growth in this corridor the Government has committed £10 million of funding.
• HS2 – the budget announced funding for tunnelling to the central London terminus, catalysing private investment into the station and local area.
• Road maintenance – the Chancellor has announced a nearly 50 per cent increase, on 2024-25, in funding for local roads maintenance.
• City Region Sustainable Transport Settlements – the budget provided an additional £200 million for City Region Sustainable Transport Settlements, bringing local transport spending for Metro Mayors in 2025-26 to £1.3 billion. The government also committed to work with Mayoral Combined Authorities to increase the ambition on housing investment that accompanies expansion of transport links.
• Cycling and walking infrastructure – the Government committed to provide an additional £100 million investment in cycling and walking infrastructure in 2025-26, to support Local Authorities to install cycling infrastructure and upgrade pavements and paths.

The Government have also raised the Bus fare cap to £3 but extended the cap to December 2025.

Housing was also a priority, with the Chancellor stating an aim to build 1.5 million homes by the end of the current parliament. £5 billion was announced for new housing. New housing and planning officers are also expected to be introduced to support developers and communities to build local infrastructure.

The Government stated that it will continue to take action to ensure that the planning system supports public and private investment. This is expected to include:

• Responding to the National Planning Policy Framework consultation before the end of the year to confirm pro-growth reforms to the planning system.
• Implementing legislative changes to ensure a simplified and streamlined planning system, through the Planning and Infrastructure Bill to be introduced in Parliament early next year.
• Providing an additional £5 million to deliver improvements to the planning regime for Nationally Significant Infrastructure Projects, as well as £46 million to boost capacity and capability in local planning authorities.
• Allocating £70 million in 2025-26 to support infrastructure and housing development while boosting nature’s recovery.

At the same time, the Government announced £1bn of funding to remove dangerous cladding next year, as per the suggestion from the Grenfell Inquiry, and an extra £3.4bn for insulation instalments to improve the current housing stock's energy efficiency.

The Government also stated that discounts on the Right to Buy scheme will be reduced and councils in England enabled to keep all the receipts generated by sales. This is intended to deliver on the government’s manifesto commitment to protect existing council housing stock and boost councils’ social housing capacity.

Devolution

The Government purport to be working closely with local leaders on the upcoming English Devolution White Paper, setting out plans to widen devolution to more areas and deepen the powers of existing mayors and their combined authorities.

The Chancellor has announced plans to roll out new Local Growth Plans working with places to take advantage of their economic potential and foster clusters of well-paid jobs and deliver integrated settlements in Greater Manchester and the West Midlands (from the start of the 2025/26 financial year), to provide Combined Authority Mayors with more control over funding with a flexible single pot.

The Government has committed to extending funding for Innovation Accelerators, including the West Midlands Innovation Accelerator, into 2025-26 with the aim of bolstering high-potential innovation clusters across the country.

This settlement has also confirmed funding for Investment Zones and Freeports, provided £900 million for continuation of UK Shared Prosperity Funding (at a reduced level for a transition year, in advance of anticipated wider funding reforms), and confirmed funding for core Levelling Up Fund projects.

However, the Government has indicated they are minded to cancel unfunded Levelling Up Culture and Capital Projects, and the West Midlands culture and inward investment funding, that were announced at Spring Budget 2024, but will consult with potential funding recipients before making a final decision.

Local Government Funding

The budget made a number of announcements on local authority funding, however most notable for Greater Birmingham businesses was the commitment to have a framework in place to support those in most difficulty and pursue a comprehensive set of reforms to return the sector to a sustainable position.

The Chancellor has said that this will include reform of the approach to allocating funding through the Local Government Finance Settlement, starting with a targeted approach to allocating additional funding in 2025-26, ahead of a broader redistribution of funding through a multi-year settlement from 2026-27. Further details are anticipated in an upcoming local government finance policy statement.

Wider Public Sector Funding:

The NHS

The budget stated that the NHS will receive an additional £22.6 billion of funding from 2023/24 to 2025/26 which will support the Government’s key objectives for improving the service including reducing patient waiting lists and shortening referral-to-treatment times. Capital investments include £1.5 billion to expand surgical and diagnostic capacities, £1 billion for essential maintenance and upgrades, and £2 billion for technological and digital advancements to improve NHS productivity and patient access​.

Defence

The defence budget is set to grow in line with GDP in 2025/26, reinforcing the UK's commitment to meet NATO's 2 per cent GDP spending target and eventually aiming for 2.5 per cent. Key allocations include investments in modernising the Armed Forces and £3 billion of annual funding in continued support for Ukraine. The budget also initiates reforms to improve efficiency and accountability within the defence sector, such as establishing a Strategic Military Headquarters​.

Police and Crime

The Government has announced support for the justice system by providing an additional £1.9 billion total departmental spending to the Ministry of Justice in 2025/26. Total Home Office funding will increase from £20.3 billion in 2023/24 to £22.1 billion in 2025/26. Continued investment is intended to support frontline policing levels across the country and deliver more neighbourhood police officers and Police Community Support Officers. These measures are also intended to support the Government’s efforts to crack down on shoplifting.

What is the Greater Birmingham Chambers of Commerce Response to the Autumn Budget 2024?

The Chancellor was keen to project an image of being fiscally responsible whilst also talking up the UK’s prospects as a destination of choice for growing a business and attracting investment – there’s no getting away from the fact that she has chosen businesses to shoulder the biggest burden of tax rises in a bid to strike the right balance. Raising the rate and lowering the threshold for employers National Insurance coupled with increases to the National Living Wage will clearly add to the crippling cost pressures many continue to face on a daily basis as evidenced in our latest Quarterly Business Report.

Changes to corporate gains and inheritance tax will also be felt by those entrepreneurs and investors looking to dispose assets. There were announcements made such as business rate relief for those operating the retail, hospitality and leisure industry and a continued freeze on fuel duty that will be welcomed – whether this will be enough to bolster confidence remains to be seen particularly as longer-term decisions around the wider business rates system and VAT framework have been avoided.

Changing the public borrowing rules seems to have caused relatively few ripples amongst the bond markets, however, businesses will rightly question the Government’s ability to use this spare capacity to deliver large scale infrastructure given the challenges we’ve seen with HS2 and other key projects over the years – we can only hope the announcements made related to Great British Energy and other green projects will kickstart investment and create jobs.

The Speech hit the right notes in identifying the importance of boosting infrastructure spend, tackling skills gaps, driving innovation and continuing to turn the dial on regional devolution; as recommended by the Business Commission West Midlands, firms are craving a stable political and economic environment that gives businesses the confidence to invest and grow.

However, it’s hugely disappointing to see plans in place to cut back on culture spend locally – not only does this industry fuel tourism and footfall, it also plays a huge role in a shining a spotlight on the region internationally and ultimately attracts more foreign direct investment.

The coming weeks and months are crucial – the Government must use this Budget as a platform to build stronger ties with the business community in order to shape a coherent growth narrative that will boost private sector confidence and fuel prosperity; as a Chamber we will continue to champion our region and the many wonderful businesses operating here as they continue to show their resolve in testing times.