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Budget 2024
Well folks, we knew it wasn’t going to be pretty. We knew it wasn’t going to be fun. And we knew it would hurt. But I’m not sure anyone foresaw just how vicious and vindictive Labour’s first budget in over 14 years would prove to be.
As the chancellor took to the despatch box, like taxpayers across the country, the TPA held its breath hoping we would be wrong. Hoping that Rachel Reeves meant it when she said she wanted to drive growth. That she meant it when she said she didn’t want to hit workers. That she meant it when she said she wanted to fix the finances. On all counts, it was bad news for taxpayers and bad news for Britain.
In the days preceding the budget, TPA towers was a hive of activity. Our team were busy making the case against tax rises with a flurry ([link removed]) of research papers and briefings ([link removed]) released. With much talk of a wealth tax being imposed, our resident egg-heads produced a seminal report on the devastating impact of wealth taxes ([link removed]) , why they’ve always failed to live up to the claims of their proponents, and why whenever they’re introduced, they’re always repealed or dramatically scaled back. Writing for City A.M., John O’Connell, our chief executive, issued a stark warning to anyone who thinks a wealth tax is a good idea ([link removed]) : “The top one per cent of earners already pay 29 per cent of all income tax. And 41 per cent of Treasury income from capital gains came
from those who made gains of £5m or more, despite representing less than one per cent of capital gains taxpayers each year. Drive them away at your peril.” Darwin Friend, the TPA’s head of research, gives an excellent explanation in this video ([link removed]) .
Fortunately, even this Labour government wasn't mad enough to do it. But for a government that claims to represent stability and be striving for growth, some of their other choices had us questioning their grip on reality.
Just hours before Reeves stood up in Parliament, we thought she could do with one more reminder about the dire state of the public finances. Parking up outside Downing Street, our debt clock ([link removed]) van made absolutely clear how urgent the situation is. Sadly, the chancellor had other ideas.
The good news
Having been frozen since 2021, Reeves confirmed that income tax thresholds would start to rise from 2028. This stealth tax raid has pulled millions of people into higher tax bands so it can’t come to an end soon enough.
A penny off draught beer will be welcome for pubs and freezing fuel duty is good news for motorists. And... that’s it. It was all downhill from there.
The bad news
Reeves proceeded to unleash some of the biggest tax hikes we’ve seen in a generation.
Capital gains tax went up. The inheritance tax threshold freeze was extended to 2030, expanded to include private pensions and, from 2026, will be levied on family farms. Non-draught alcohol taxes went up. Tobacco duty was increased and a new tax on vapes is being introduced. But really putting the boot into the British economy and workers across the country were the changes to employer’s national insurance.
The jobs tax was hiked to 15 per cent and the salary level that it’s payable from was slashed from £9,100 to just £5,000. It’s difficult to express just how damaging this move will be. There’s a reason it’s called a jobs tax. Hiking employer’s national insurance means fewer jobs, lower wages, and higher prices. We’ll all be paying for this one.
I wish I could say that’s as bad as it gets, but the bad news kept coming with the chancellor embarking on a massive increase in public spending. Since her tax hikes aren’t enough, borrowing is also set to soar triggering a spike in interest rates and a weakening of the pound. With air passenger duty also increasing holidays are about to become far more expensive thanks to this rotten budget.
What does all this mean? Well, as a result of Reeves’ measures, the tax burden is now set to reach a record high. John was furious ([link removed]) in his response to the budget: “We were consistently told that there was no need for big tax hikes because of a focus on growth, so taxpayers will be disgusted by the whoops and cheers of Labour MPs celebrating the fact that Rachel Reeves has just condemned the country to a record high tax burden.” Taking aim at the inheritance tax changes ([link removed]) , John blasted: “The Chancellor’s decision to levy inheritance tax on private pension inheritance is a particularly cruel and capricious means of raising revenue.” It’s fair to say we were less than impressed.
A nation of taxpayers - budget special
Within an hour of Reeves wrapping up her speech, John sat down with Maxwell Marlow, director of research and education at the Adam Smith Institute, to record the latest episode ([link removed]) of A nation of taxpayers, hosted by Duncan Barkes.
Max certainly didn’t mince his words ([link removed]) when asked for his reaction: “I think that was an excoriating budget for taxpayers and for businesses. We have seen from the OBR that growth is really not going anywhere… There’s taxation everywhere you look, hitting working people, hitting businesses.”
If you want straight talking analysis of this budget where you’ll hear the things ministers don’t want you to know, have a listen ([link removed]) .
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Blog of the week
We’ve got a double whammy of blogs this week. First up, our former chairman, Mike Denham, explains how the chancellor’s changes to the fiscal rules have enabled her to borrow even more ([link removed]) , and what the implications of this are for taxpayers. As Mike observes: “Given how much higher British levels of tax and spend are relative to the consensus of the growth-optimising levels we reviewed in our paper on the subject earlier this year, we can be pretty confident that any increase is likely to be economically damaging.”
Next up, TPA wonk, Callum McGoldrick, brings us his key takeaways ([link removed]) from the budget. Broken down into the good, the bad, and the ugly, Callum’s assessment is daming: “More taxes, more borrowing and more spending. So much for that changed Labour Party…”
One more thing
The Conservatives finally wrapped up their leadership election on Saturday with Kemi Badenoch crowned the winner and new leader of the opposition.
As Kemi plots how to get the Tories back into government, if she’s looking for any ideas on what to do should she get there, we’ve got a few we’d be happy to share.
Benjamin Elks
Grassroots Development Manager
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