Council and business leaders across Nottinghamshire and the East Midlands have described the Labour Government’s budget as a “tough” one for businesses.
Chancellor Rachel Reeves delivered Labour’s first budget in more than 14 years on Wednesday (30 October), announcing tax rises worth £40bn in a bid to stabilise public services and finances. Businesses will pay more than half of that figure.
The rate of income tax and National Insurance paid by employees will stay the same.
However, employers face higher National Insurance contributions on their payroll payments.
Ms Reeves lowered the current £9,100 threshold at which employers start paying National Insurance contributions, down to £5,000. The percentage of contributions will also increase from 13.8 per cent to 15 per cent from April 2025.
The Office for Budget Responsibility (OBR), which monitors the government’s spending plans and performance, said most of the burden from the increase will be passed on to workers through lower wages, and to consumers through higher prices.
At the same time, the national minimum wage for those aged 21 and over will increase from £11.44 to £12.21 per hour from April, and the rate for 18 to 20-year-olds will rise from £8.60 to £10.
At a roundtable event hosted by the East Midlands Chamber at law firm Freeths, business leaders from across the region branded the budget a “tough day at the office”. There were audible sighs when the National Insurance contribution hikes were announced.
Richard Blackmore, director of policy and insight at the Chamber, told the Local Democracy Reporting Service: “We’ve just heard a tough budget for business.
“I think there are going to be several conditional costs that have just come on, and of course any costs coming onto businesses mean they have to make a decision about how they can front that cost, and what that might mean for investment or recruitment.
“First impressions are it’s a tough day at the office.”
Reacting to the budget, one business leader from a food manufacturing firm said the costs would be in the tens of millions next year, while others feared they may struggle to hire apprentices. The director of a brewery also feared the tax cut by 1.7 per cent on draught drinks (around 1p per pint) would simply be offset by higher costs in other areas introduced by the budget.
Scott Knowles, the Chamber’s chief executive, added: “Those two components themselves will prove to be real cost additions to businesses.
“That is not undermining that, yes, people should get a fair day’s pay for a fair day’s work, but we heard from some of our members around the table whilst the budget was being announced that costs are going to run into the millions.”
The budget also offers what is anticipated to be real-terms funding increases of £1.3bn in grant funding for local authorities and around £600m extra earmarked for social care – an increase of around 1.9 per cent.
Jonathan Carr-West, chief executive of the Local Government Information Unit (LGIU), said money for social care and additional funding for housing and special educational needs are the very areas that are driving many councils to bankruptcy. However, he added: “But this extra funding is not even half the gap that councils currently face.”
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The deputy leader of Labour-run Nottingham City Council, Cllr Ethan Radford, said that while difficult choices have to be made, the budget is the first step to fixing “broken Britain after 14 years of Tory austerity”.
“The Chancellor’s announcements today are a move in the right direction; rebuilding the economy so it works for everyone, investing in the public services we all rely on, and protecting working people after 14 punishing years under the Conservatives,” he said.
Some of the other major changes the Chancellor announced include:
- Fuel duty will stay frozen next year, and the 5p per litre cut will remain.
- Capital gains tax lower rate will increase from 10% to 18%; higher rate from 20% to 24%.
- Residential property capital gains tax will remain at 18% and 24%.
- Two “permanently lower” business tax rates for retail, hospitality, and leisure properties.
- 40% relief on business rates in 2025-26 with a £110,000 cap.
- Inheritance tax thresholds frozen until 2030.
- Inheritance tax to apply to unspent pension pots.
- Agricultural property relief and business property relief will not be allowed on the wealthiest estates.
- Higher rate stamp duty for second homes increased to 5% from Thursday.
- Alcohol duty rates on non-draught drinks to increase in line with RPI from February.
- Draught alcohol duty cut by 1.7% – 1p off a pint.
- HS2 will go to Euston in central London.
- Every government department must make 2% cuts by next year.
- £22.6bn extra for the NHS’s day-to-day health budget; £3.1bn more for the capital budget.
- £2.3bn for schools to hire teachers next year; £6.7bn for the schools capital budget.
- £5bn investment for housing, including £3.1bn more for the Affordable Homes Programme.
- £2.9bn more for the Armed Forces next year.
- £500m increase in road budgets next year for pothole repairs.
- Weekly earnings limit for carer’s allowance raised to the equivalent of 16 hours at national living wage per week.
- Extra £3.4bn for the Scottish government, £1.7bn for the Welsh government, and £1.5bn for Northern Ireland.
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