Chancellor Rachel Reeves to deliver Budget amid calls for more money for public services

Chancellor Rachel Reeves will deliver her Budget later as she seeks to plug a £40bn funding gap in the public finances.

Reeves, the first woman to hold the post of chancellor, will look to raise revenue through tax rises, while also making spending cuts.

The government has already announced some of the measures it will take to address the “black hole” in public finances – which is said to be £22bn.   

In July, the government confirmed the winter fuel payment will be slashed for the majority of pensioners, with only those in receipt of pension credit or other means-tested benefits remaining eligible.

The state pension is also set to rise by four per cent in April 2025, and VAT will be added to private school fees.   

The windfall tax on oil and gas profits will also be increased. It will rise to 38 per cent from 35 per cent and the period will also be extended to 31 March 2030.   

Reeves has previously said there will be “no return to austerity,” suggesting that tax rises will fill the gap in public finances.   

There have been strong suggestions that she is planning to increase national insurance contributions paid by employers.    

Companies pay a rate of 13.8 per cent of employees’ earnings above a threshold of £9,100 a year.   

It has also been suggested that changes to inheritance tax, capital gains tax, and pension taxation could be implemented to fill the hole in public finances. 

Yesterday, Reeves welcomed a 6.7 per cent rise in the National Living Wage from from £11.44 to £12.21 an hour from April 2025. The chancellor said the move would benefit more than 3 million workers, a boost of around £1,400 a year for those working full time.

But First Minister John Swinney called on the Treasury to do more to help growth the economy and help his government eradicate child poverty.

He said: “My government is committed to growing the economy to generate the wealth to invest in our public services and eradicate child poverty. We want to use that investment to create a partnership between government and business that will make the most of Scotland’s many economic opportunities.

“The Office for Budget Responsibility highlighted recently the potential for public investment to deliver permanent improvements in the economy. It is welcome that my calls for the chancellor to amend her fiscal rules have been heard, with indications last week that there will be scope for greater investment.

“The chancellor has the chance to choose to deliver a UK Budget that invests in our public services and supports the entrepreneurial spirit displayed in Scotland’s business sector. With these new rules in place the chancellor must use the fiscal headroom they create to deliver a Budget that immediately and significantly enhances Scotland’s resource and capital funding, enabling us to invest more in our public services and take forward the vital infrastructure projects that support economic growth, net zero, and action to tackle child poverty.”