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Chancellor of the Exchequer Rachel Reeves has stated that she is making difficult decisions following a Treasury spending review that uncovered £22 billion in unfunded commitments. Ms Reeves has confirmed that the Autumn Budget will take place on 30th October.
In a statement to Parliament, the Chancellor made several announcements, noting that further details on tax and spending plans would be disclosed in the Budget. She revealed that urgent measures are needed to alleviate the £22 billion shortfall in public finances, with £5.5 billion in savings required this year and over £8 billion next year.
Among the immediate savings announced by Ms Reeves are:
Ms Reeves also outlined the next steps in delivering tax commitments from Labour’s election manifesto, including ending VAT exemptions for private schools from 1st January 2025, aimed at funding the recruitment of 6,500 new teachers, and replacing the non-domicile tax regime with a new, internationally competitive residence-based system.
The Chancellor stated:
“This is not the statement I wanted to give today, and these are not the decisions I wanted to make. But they are the right decisions in difficult circumstances.”
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The first King’s Speech since Labour’s General Election victory has seen the new government pledge to make securing economic growth its primary mission.
During the State Opening of Parliament, King Charles III delivered the 2024 King’s Speech, announcing plans to accelerate housebuilding and improve infrastructure through planning reforms.
The government also committed to:
Shevaun Haviland, Director General of the British Chambers of Commerce (BCC), remarked:
“The government’s clear intention to speed up the planning system for large-scale infrastructure can inspire business confidence if it is effectively delivered. Measures to increase business resilience, reform the apprenticeship levy, and support sustainable aviation fuel could also boost the economy.
“There are still significant issues to address. Improving our trade relationship with the EU will not be straightforward, and detailed consultations with businesses on the Plan to Make Work Pay will be essential.”
“However, today’s speech indicates that the voice of business has been heard and that the government is introducing measures that benefit firms and help unlock investment. We want to work in partnership with the government to make this happen and shift the economy out of first gear to get it moving again.”
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The UK government is establishing a National Wealth Fund to stimulate private sector investment, backed by £7.3 billion in funding through the UK Infrastructure Bank (UKIB).
Chancellor Rachel Reeves and Business Secretary Jonathan Reynolds have instructed officials to commence work on the new National Wealth Fund, which will consolidate efforts from the UK Infrastructure Bank and the British Business Bank to mobilise private sector investment and drive growth.
The National Wealth Fund will bring together key institutions and target investors to unlock billions more in private investment, generating returns for taxpayers. An additional £7.3 billion will be allocated through the UKIB, focusing on priority sectors including green and growth industries, to catalyse private investment. This funding is in addition to existing UKIB funds.
The Chancellor stated:
“This new government is getting on with the job of delivering economic growth. I have been clear that there is no time to waste.
“I have previously committed to establishing a National Wealth Fund. I am now going further by bringing together key institutions.
“We need to go further and faster if we are to fix the foundations of our economy, rebuild Britain, and make every part of our country better off. That is why, in less than a week, we are establishing a new National Wealth Fund and bringing together the key institutions that will help unlock investment in new and growing industries. Britain is open for business – and the work of change has begun.”
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The British Business Bank has launched the Growth Guarantee Scheme, designed to help smaller businesses access finance. This scheme is the successor to the Recovery Loan Scheme and is expected to support approximately 11,000 small businesses.
The British Business Bank has accredited 41 lenders for the scheme, which will run until March 2026. The scheme supports various financial products, including term loans, overdrafts, asset finance, invoice finance, and asset-based lending facilities. Not all lenders will offer all products.
Facility sizes start at a minimum of £1,000 for asset finance, invoice finance, and asset-based lending, and £25,001 for term loans and overdrafts, with a maximum of up to £2 million per business.
Martin McTague, National Chair of the Federation of Small Businesses (FSB), stated:
“We are delighted that the British Business Bank has officially launched the Growth Guarantee Scheme to provide much-needed finance to start-ups and scale-ups so they can grow.
“The new scheme will help small firms secure the funding they need to achieve their ambitions. The Growth Guarantee Scheme will be an important part of the funding landscape for small firms, whose growth will be crucial for the UK’s overall economic recovery.”
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The UK’s economic recovery is beginning to take hold, according to the Confederation of British Industry (CBI), after GDP grew faster than anticipated in May.
The UK economy expanded by 0.4% in May, rebounding from zero growth in April, according to the Office for National Statistics (ONS). The growth was bolstered by strong performances in retail and construction sectors, the ONS added.
Ben Jones, CBI Lead Economist, stated:
“The latest data shows that the UK’s economic recovery is starting to take root. While growth in May was driven by a rebound in sectors such as retail and construction, which were previously impacted by poor weather earlier in the spring, recent months have seen gradual increases in activity across a wide range of sectors.
“The new Labour government will benefit from some economic tailwinds going forward, with consumer confidence rising as lower inflation and strong wage gains support household incomes. However, many firms remain cautious about the near-term outlook.
“While the election result will help dispel some recent uncertainty, it could take a turning of the interest rate cycle for the recovery to fully embed itself.
“The new government’s focus on making growth a priority is welcome. However, to put the economy on a path to long-term sustainable growth, we need to see concrete actions to address persistent challenges such as labour shortages and productivity issues, which are currently holding the economy back.”
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