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Semafor Signals

UK government outlines first budget as Labour seeks to plug spending ‘black hole’

Updated Oct 30, 2024, 10:23am EDT
UK
Chancellor Rachel Reeves carrying the red budget box, leaves Downing Street
Mina Kim/Reuters
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The News

UK Chancellor of the Exchequer Rachel Reeves unveiled the Autumn Budget to Parliament on Wednesday. The budget is the new Labour government’s first fiscal policy outline — the center-left party stormed back to power in the UK after 14 years of successive Conservative governments.

Reeves has repeatedly warned of the need to plug a £22 billion ($52 billion) budget “black hole” left by the previous Conservative government through cuts and new taxes.

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The proposed changes include increasing National Insurance contributions paid by employers, abolishing certain tax loop holes for UK residents who list their permanent address abroad, and raising the national minimum wage.

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SIGNALS

Semafor Signals: Global insights on today's biggest stories.

Labour is trying to walk a very thin line

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Sources:  
The Guardian, BBC, The Independent

Labour promised not to increase taxes on “working people” in its election manifesto — phrasing that has been criticized for its vagueness, The Guardian’s senior political correspondent noted. Critics said Reeves’ decision to raise employers’ National Insurance contributions risks the cost being passed on to employees, as it could lead to lower wage increases further down the line. Ultimately, these and other tough choices suggest Prime Minister Keir Starmer’s new government has decided to part with the “national delusion” that its possible for the UK to enjoy European-style public services, but with far lower taxes, The Independent argued in an editorial.

‘Critical tension’ at heart of Labour’s growth agenda

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Sources:  
Financial Times, City AM

Lobbying campaigns mounted by private equity firms have highlighted a “critical tension” in Labour’s growth agenda that exists between raising taxes to fund ailing public services and attracting international investment to the UK, the Financial Times reported ahead of the budget announcement. A pervasive fear is that abolishing so called “non-dom” status — when a UK resident’s permanent home is outside the UK for tax reasons — would trigger a mass exodus of businesses and entrepreneurs to more business-friendly locations like Italy or Switzerland are “overdone,” one private equity boss told City AM: “Good luck trying to do a deal with the US out of Milan [rather than London]. The UK market is something America understands,” he said.

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