Autumn Budget 2024: fact checked

On Wednesday 30 October, Labour delivered a Budget for the first time in 14 years. The Chancellor of the Exchequer Rachel Reeves, as the first ever female chancellor, was also the first woman to deliver the Budget. Outgoing Conservative leader Rishi Sunak responded to the chancellor’s statement for the Opposition. 

We’ve taken a look at a number of different claims, including on employer National Insurance, bus fares, growth forecasts and more. 

Did the Budget break Labour’s National Insurance commitment?

The single biggest tax raising measure outlined in the Budget was an increase in employers’ National Insurance contributions (NICs), which the Office for Budget Responsibility (OBR) says is expected to raise £25.7 billion a year by 2029/30 (before accounting for the indirect effects of the policy).

Changes to employer NICs include a 1.2 percentage point rate increase, a reduction in the threshold at which employers begin paying NICs from £9,100 to £5,000 a year and an increase in the Employment Allowance (relief smaller employers can claim on their NICs liabilities).

Ms Reeves claimed in setting out the Budget that Labour had kept “every single commitment that we made on tax in our manifesto”. But in his response Mr Sunak claimed the Budget “raises tax on working people by increasing National Insurance and breaking Labour’s promise”.

Exactly what Labour promised on tax prior to the election has been disputed in recent days, with politicians offering different interpretations of what the party’s manifesto pledge on National Insurance actually meant. 

As we wrote earlier this week, the manifesto said: “Labour will not increase taxes on working people, which is why we will not increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT.”

In recent weeks Labour has argued its commitment to “not increase National Insurance” applied to “working people” but not employers, with ministers saying it meant that people wouldn’t see higher taxes on their payslips. It’s also been noted that during the election campaign the Conservatives themselves warned that Labour had only ruled out rises to employee, not employer, National Insurance contributions.

But Labour’s manifesto didn’t explicitly specify that the commitment applied only to employee National Insurance, leading Institute for Fiscal Studies (IFS) director Paul Johnson to say earlier this month that increasing employer NICs would seem to be a “straightforward breach of a manifesto commitment”.

It’s also worth noting that in some interviews ahead of the election Ms Reeves did not appear to make it clear that Labour’s commitment not to increase National Insurance only applied to employee NICs.

While an increase in employer NICs doesn’t directly increase the amount workers pay in tax, the OBR forecasts that approximately three-quarters of the employer NICs will be passed on to employees through lower real wages, thereby reducing the overall amount raised by the measure after accounting for its indirect effects. 

The OBR also says that the passing-on of the employer NICs increase is partly responsible for what it forecasts will be a “sharp” slowdown in real household disposable income growth in 2026/27 and 2027/28.

Claims about the ‘£22 billion black hole’ 

During her speech, the chancellor said that an OBR review, conducted following Labour’s claim it inherited a “£22 billion black hole” in the public finances, found that the previous government had been aware of these “undisclosed pressures”. 

As we’ve explained in more detail previously, the “£22 billion black hole” figure came from a Treasury audit published in July, which found that the forecast overspend on departmental spending in 2024/25 was expected to be “£21.9 billion above the resource departmental expenditure limit (RDEL) totals set by the Treasury” in the 2024 Spring Budget. 

Ms Reeves said today: “The Office for Budget Responsibility have published their own review of the circumstances around the Spring Budget forecast. They say that the previous government, and I quote, did not provide the OBR with all the information to them and, had they known about these undisclosed pressures that have since come to light, then their Spring Budget forecast for spending would have been, and I quote again, materially different.”

The Conservatives have rejected Labour’s claim, however. Responding to the Budget, Mr Sunak said the “OBR has in fact declined to back up her claims of a fictional £22 billion black hole”.

The OBR review published today found that the Treasury did not share all information about in-year spending pressures, and that had it done so a “materially different judgement” would have been reached about RDEL spending in 2024/25, though the OBR could not say how much higher the forecast would have been.  

The review said: “The judgement the OBR made in March 2024 for a small underspend relative to the 2024-25 DEL limit has subsequently been revealed as too optimistic given the pressures known, but not shared, by the Treasury at the time.”

The review found that the Treasury knew in February about pressure on departments’ budgets for 2024/25, amounting to £9.5 billion above what was known to the OBR at the time of the Spring Budget. It added that “the size of known pressures increased” between February and the March Budget, and “the size of the reserve to meet those pressures was reduced by £3.5 billion”, information which was not shared with the OBR. 

It suggested that, had all the information been known by the OBR at the time, it would have resulted in further assessment about plans to manage pressures and offset savings to stay within departmental budgets. 

It says: “That assessment did not take place and so it is not possible to judge how it would have concluded.” 

Full Fact has contacted both Labour and Conservatives for comment, and will update this article if we receive a response. 

How do the Budget’s tax rises compare historically? 

As a result of the Budget, taxes are set to increase by £40 billion overall, and Rishi Sunak claimed the tax rises were “record breaking”. 

According to the IFS, as a share of GDP by the end of the forecast period, the tax rises announced in today’s Budget are the second highest “in decades”. The IFS said today’s Budget will see a 1.21% increase in taxes as a percent of GDP by the end of the forecast period, while the Spring Budget in 1993 saw a 1.45% rise. 

Budget 1993 was of course Lamont, not Lawson... pic.twitter.com/aLjpPjhiXo

— Ben Zaranko (@BenZaranko) October 30, 2024

However the OBR told us that in cash terms the overall tax increase in today’s Budget is even higher than in 1993, when the Conservative chancellor Norman Lamont raised taxes by £38.5 billion. 

Had the bus fare cap been due to end? 

Elsewhere in her speech Ms Reeves claimed the previous government’s policy was “for the bus fare cap to end this December”.

It’s true that before the general election the £2 bus fare cap in England had been due to end in December. But it’s important to note that in their manifesto prior to the election, the Conservatives did pledge to extend this cap and keep it at £2 “for the entirety of the next Parliament”. 

Under measures announced today, the £2 cap on single bus fares will now be replaced with a £3 cap for the whole of 2025.

Has the OBR forecast growth to be lower under Labour? 

Responding to the Budget, Mr Sunak said the OBR “has forecast growth is going to be lower under this government than it was forecast to be under the Conservatives”.

The OBR says real GDP cumulative growth from 2024 to 2028 is forecast to be 7.1% under Labour’s Budget, down from 7.6% in March’s forecast when the Conservatives were still in government. 

But that doesn’t give the full picture—in the short term growth is forecast to be higher.

The OBR now forecasts the economy will grow by 1.1% this year, up 0.4 percentage points from its previous forecast in March. It also forecasts higher growth of 2% in 2025, up 0.1 percentage points from its March forecast. 

From 2026 to 2028 though lower growth is now expected compared to what was forecast in March, as the OBR says “the effects of monetary policy easing fade and the support to demand from fiscal policy wanes”. The OBR predicts growth in 2026 will be 1.8% (down 0.2 percentage points from the March forecast) and in 2027 and 2028 will be 1.5% (down 0.3 and 0.2 percentage points in each of those years respectively). 

Overall the OBR says that the Budget’s policies “temporarily boost output in the near term, but leave GDP largely unchanged in five years”. 

The OBR also stresses that its forecasts are uncertain, concluding that “to give some sense of the potential range of uncertainty, based on historical forecast errors there is a roughly one-in-five chance that annual GDP growth in 2025 is either negative or above four per cent”.

It goes on to say “the net economic effect of measures announced at this Budget on the level of output, assuming they are permanent changes which are maintained in the long run, begins to turn positive from 2032-33 onwards”. 

Commenting on the forecasts, the IFS said: “The OBR pointed to a short-term sugar rush, as a result of the debt-financed spending splurge, but that turns into a modestly negative impact by the end of the parliament. In the longer term, extra investment, planning reform and greater stability should all help to boost growth, and the OBR said as much. They think the Budget will eventually boost output in a sustainable way, but only from 2032.”