Budget 2024: All you need to know from Rachel Reeve

The Chancellor’s plans will see the tax burden reach an historic high, while borrowing increases by an average £32.3 billion a year as spending increases by around £70 billion annually over the next five years.

Ms Reeves said the measures were necessary to address the “black hole” in the public finances left by the Tories while pumping billions into schools and hospitals.

She confirmed plans to hike employers’ national insurance contributions and increase capital gains tax, while also making changes to inheritance tax and stamp duty.

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 per cent of gross domestic product (GDP) in 2027-28, the highest since 1948 as the UK recovered from the impact of the Second World War.

In the first Budget ever delivered by a female chancellor, and the first Labour financial statement since 2010, Ms Reeves said: “This is a moment of fundamental choice for Britain.

“I have made my choices. The responsible choices. To restore stability to our country. To protect working people.

“More teachers in our schools. More appointments in our NHS. More homes being built.

“Fixing the foundations of our economy. Investing in our future. Delivering change. Rebuilding Britain.”

But Tory leader Rishi Sunak accused Ms Reeves of “fiddling the figures” by changing the way debt is measured adding: “The reason the Chancellor has increased borrowing and increased taxes is because she has totally failed to grip public spending.”

Oxford East MP Anneliese Dodds arrives in Downing Street ahead of the Budget (Image: PA/Stefan Rousseau) The Office for Budget Responsibility’s forecast suggested the increase in spending would provide a temporary boost to GDP, upgrading growth this year from 0.8 per cent to 1.1 per cent and from 1.9 per cent to two per cent in 2025.

But there are downgrades in subsequent years – down from an expected two per cent in 2026 to 1.8 per cent, from 1.8 per cent in 2027 to 1.5 per cent and from 1.7 per cent in 2028 to 1.5 per cent.

And the Budget measures will also add to pressure on inflation, the OBR said.

The latest OBR forecasts indicate that inflation will rise to 2.6 per cent in 2025 “partly due to the direct and indirect impact of the Budget” – significantly above the 1.5 per cent rate previously predicted.

It also increased projections for the following three years, with inflation expected to hit 2.3 per cent for 2026, 2.1 per cent for 2027 and 2.1 per cent for 2028

Ms Reeves claimed the scale of the public spending problems she inherited were worse than previously thought.

She repeated her claim that a £22 billion “black hole” left by the Tories in this year’s finances showed they “hid the reality of their public spending plans”, with problems recurring in future years.

The OBR steered clear of using the £22 billion figure in its assessment of the previous government’s figures.

Ms Reeves also promised to set aside £11.8 billion to compensate those affected by the infected blood scandal and £1.8 billion to compensate victims of the Post Office Horizon scandal.

The Chancellor said: “Together, the black hole in our public finances this year, which recurs every year, the compensation payments which they did not fund and their failure to assess the scale of the challenges facing our public services means this Budget raises taxes by £40 billion.

“Any Chancellor standing here today would face this reality. And any responsible Chancellor would take action.

“That is why today, I am restoring stability to our public finances and rebuilding our public services.”

Rachel Reeves leaves 11 Downing Street before delivering her Budget in the House of Commons (Image: PA/Stefan Rousseau) She confirmed a raid on employers’ national insurance contributions (NICs), with higher rates and a lower starting threshold, raising £25.7 billion by 2029-30.

The rate will increase by 1.2 percentage points to 15 per cent from April 2025, with payments starting when an employee earns £5,000, down from the current £9,100.

“I know that this is a difficult choice. I do not take this decision lightly,” Ms Reeves said.

Despite Labour’s manifesto commitment not to hit working people with taxes, the OBR estimated that firms will pass on the impact of NICs through lower wages.

By 2026-27 the OBR forecasts that 76 per cent of the total cost is passed on through lower real wages – a combination of pay cuts and increased prices.

The measure could also lead to the equivalent of around 50,000 average-hour jobs being lost, the watchdog said.

The Institute for Fiscal Studies’ director Paul Johnson said: “The OBR suggests that three-quarters of the impact of employer NICs will be felt by employees, even if the changes don’t show up on payslips.

“Indeed, these tax rises partly explain why the OBR has downgraded its projections for real household income growth over the next few years.

“Somebody will pay for the higher taxes – largely working people.”