Media Release

Social Market Foundation responds to Autumn Budget 2024

The Social Market Foundation's response to the Autumn Budget 2024 follows below:

Overall take on the Autumn Budget 2024, Theo Bertram, Director, Social Market Foundation said:

For a first Budget, it is hard to think of a tougher test. Economically, it’s an almost impossible balancing act: how do you get growth, demonstrate prudence, repair public services and raise tax fairly?

Reeves’ answer to that today was in some ways typically Labour: higher taxes, higher borrowing, and higher public spending, with the taxes largely coming from employers and the wealthy. She appears to have managed to pull this off without scaring the markets – and after the recent disaster of Trussonomics, that is no small feat.

The SMF is pleased to see changes in alcohol duty for which we have long argued but the choice to freeze fuel duty was disappointingly short-termist and the absence of a targeted tax on remote gambling was a missed opportunity.

The changes to the fiscal rules to allow more investment in infrastructure will make a positive difference in the long-term. However in the shorter-term more than £25bn of tax rises falling on employers is a significant burden on business at a time when the government is betting on growth.
Reeves’ priority is clearly to balance the books and to fill the holes in public finances and while the scale of the tax rises are historically high, the increase in spending is still relatively slight. Departments outside of health and defence are going to need to find cuts and the government has notably chosen not to make spending commitments to tackle child poverty at this stage.

 

On alcohol taxes, Dr Aveek Bhattacharya, Research Director at the Social Market Foundation said:

“It is welcome that the Chancellor has chosen to increase the discount on tax on beer and cider in pubs relative to alcohol sold in supermarkets, something we at the Social Market Foundation have recommended for several years. It is also good to see an end to the successive freezes in alcohol duty that have cost thousands of lives, and billions of pounds for the exchequer.

“Hopefully today marks the day that the government turned the page on alcohol taxes, with today’s increase starting a new chapter that better fits with its preventative approach to health. Taxing alcohol is the single most effective way to reduce harmful drinking. However, to realise those benefits, the government will eventually need to raise in taxes in real, not just nominal, terms – something our research shows the public supports.”

 

On online gambling taxes, Dr James Noyes, Senior Fellow at the Social Market Foundation said:

“The online gambling industry has been undertaxed for years. It does not pay VAT, has long avoided corporation tax by being based overseas, and the current rate of duty is too low to reflect the costs of gambling harm to the UK economy and society.”

“Following the recent White Paper, there was an opportunity for the Chancellor to address loopholes in the tax system that the gambling industry has for too long exploited. By increasing Remote Gaming Duty, the government could have raised much-needed revenue, bringing the UK in line with other countries and reducing some of the harm caused by problem gambling. It is regrettable that the Chancellor has chosen to place the profits of the industry over the wider wellbeing of British society. We hope that this is addressed in a future review.”

 

On capital gains tax, Jamie Gollings, Deputy Research Director at the Social Market Foundation said:

“With her hands tied by manifesto commitments, it was inevitable that the Chancellor looked to Capital Gains Tax as one of the ways to boost the country’s coffers. The Exchequer has long favoured those who earn their income from assets going up in value, taxing earnings more harshly. Today the Chancellor has started to close that gap, whilst keeping Capital Gains Tax at a level below that seen in major European economies like France, Germany and Italy.”

 

On housing, Jamie Gollings, Deputy Research Director at the Social Market Foundation said:

Labour is making common sense reforms to right to buy, letting councils keep the full proceeds when properties are sold, and reducing the level of discounts. This will help to stabilise the current social housing stock, but it remains to be seen how much of the £3.1bn announced for affordable housing will go to the most low cost properties for social rent. We have recommended ‘housing fairness taxes’ – increasing levies on overseas buyers, vacant homes and ‘house-flippers’, and earmarking the up to £4bn raised for social housebuilding.”

 

On higher education, Senior Researcher, Dani Payne said,

“That the Chancellor has not responded to calls to address the inadequate levels of student maintenance for disadvantaged university students is disappointing. The government committed to supporting the aspiration of any person who is academically able to attend university. Unfortunately, for too long disadvantaged young people have either been priced out of higher education, or go to university but have a much thinner experience than their more affluent peers because they have to work hours incompatible with a full time education. The university experience should be a broad and enriching one – that includes being able to afford transport to lectures, attend extra-curricular activities, and take part in student leadership roles. All of this requires students to have adequate maintenance support to meet their basic needs. Maintenance loans have not risen with inflation, leaving students on the maximum loan £2000 worse off per year. The parental earnings threshold has been frozen in cash terms since 2008. The gap between the level of maintenance funding and what it actually costs to cover essential costs as a student is estimated to be over £8,000. This situation is incompatible with true equality of opportunity.” 

 

On transport and fuel duty, Senior Researcher, Gideon Salutin said:

“This afternoon the Chancellor again decided to freeze fuel duty in the name of protecting ‘working people’. If that is what she wanted, she could have introduced new subsidies to help poorer drivers buy EVs, or increased funding for cheaper alternatives like buses and rail. Instead, despite the strain on public finances and increasing demand for public services, the Chancellor has chosen to waste £15 billion over the next four years on tax cuts that are often not passed on to motorists by retailers and, if they are, disproportionately benefit our richest households.”

“The Chancellor explained that although she will spend billions subsidising fossil fuel vehicles, she could not find millions for urgently needed bus funding. The fare cap has had a return on investment five times the cost, including the increase in employment, productivity, air quality, safety, health, and access to services. But these benefits will likely be mitigated by the increase in fares, which will cost commuters an additional £468 per year and disincentivise people from taking the cheaper, greener, and healthier option. If the chancellor really wants an engine for growth, she should take another look at our buses.”

 

On employment, Jake Shepherd, Senior Researcher, said:

It’s reassuring to see the government committing funding to its flagship employment reform plan, helping those who are not employed and need right support to find work, while also working to reduce the benefits bill.

On the employer side, the increase in National Insurance contributions will impose additional costs for businesses. If firms seek to consolidate these costs, such as by reducing pension contributions or staff wages, Reeves may not be directly raising taxes on working people’s payslips, but could be doing so indirectly.”

 

On benefit fraud, Richard Hyde, Senior Researcher, said:

Benefit fraud is estimated to have cost the taxpayer more than £7 billion in the most recent fiscal year. Therefore, stronger efforts to crack down on taxpayers’ money being siphoned off by often organised fraudsters are to be welcomed. In such a context, the proposal for greater access to bank account information about welfare recipients is a positive move. This won’t be a silver bullet, but as part of a package of measures it is one more useful tool for fraud investigators to utilise to help them reduce the benefit fraud bill”.   

 

Contact

For media enquiries, please contact Impact Officer Richa Kapoor, at richa@smf.co.uk

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