Press release

A Budget to fix the foundations and deliver change for Wales

Chancellor takes long-term decisions to restore stability, rebuild Britain and protect working people across Wales.

• From: Wales Office, HM Treasury, The Rt Hon Rachel Reeves MP and The Rt Hon Jo Stevens MP
• Published: 30 October 2024

HM Treasury

• Chancellor takes long-term decisions to restore stability, rebuild Britain and protect working people across Wales.
• No change to working people’s payslips as employee national insurance and VAT stay the same, but businesses and the wealthiest asked to pay their fair share.
• Record £21 billion for the Welsh Government in 2025/26 includes £1.7 billion through the Barnett formula.
• Funding for freeports, City and Growth Deals and coal tips to fire up growth and deliver good jobs across Wales.

The Chancellor has delivered a Budget to fix the foundations to deliver on the promise of change after a decade and a half of stagnation. She set out plans to rebuild Britain, while ensuring working people across Wales don’t face higher taxes in their payslips. The UK Government was handed a challenging inheritance; £22 billion of unfunded in-year spending pressures, debt at its highest since the 1960s, an unrealistic forecast for departmental spending, and stagnating living standards.

This Budget takes difficult decisions to restore economic and fiscal stability, so that the UK Government can invest in the economic future of Wales and lay the foundations for growth across the UK as its number one mission.

The Chancellor announced that the Welsh Government will be provided with a £21 billion settlement in 2025/26 – the largest in real terms in the history of devolution. This includes a £1.7 billion top-up through the Barnett formula, with £1.5 billion for day-to-day spending and £250 million for capital investment.

Secretary of State for Wales Jo Stevens said:

This Budget has delivered for Wales for the first time in a generation.

The biggest settlement since devolution will provide a record boost to spending for the Welsh Government to support public services like the NHS while thousands of working people across Wales will benefit from today’s increases to their wages.

Little more than a week after the anniversary of Aberfan disaster it is fitting that we have committed £25m to make coal tips safe. It is testament to the new relationship between the UK and Welsh government, based on cooperation, respect and delivery.

We will also drive economic growth and support our world-leading Welsh industries with Investment Zones, Freeports and funding for communities across Wales.

We have prioritised money to support our steel communities, with nearly £100m to support workers and businesses.

This Budget delivers on what’s important to the people of Wales, and shows the difference we can make when two governments work together for the benefit of all.

Protecting working people and living standards

While fixing the inheritance requires tough decisions, the Chancellor has committed to protecting the living standards of working people. The decisions taken by the Chancellor to rebuild public finances enable the UK Government to deliver on its pledge to not increase National Insurance or VAT on working people in Wales, meaning they will not see higher taxes in their payslip.

• The National Living Wage will increase from £11.44 to £12.21 an hour from April 2025. The 6.7% increase – worth £1,400 a year for a full-time worker – is a significant move towards delivering a genuine living wage.
• The National Minimum Wage for 18 to 20-year-olds will also see a record rise from £8.60 to £10 an hour.
• Working people will benefit from these increases, with there estimated to be over 70,000 minimum wage workers in Wales in 2023.
• The Chancellor has made the decision to protect working people in Wales from being dragged into higher tax brackets by confirming that National Insurance Contributions thresholds will be unfrozen from 2028-29 onwards.
• The Chancellor is also protecting motorists by freezing fuel duty for one year - a tax cut worth £3 billion, with the temporary 5p cut extended to 22 March 2026. This will benefit an estimated 2.1 million people in Wales, saving the average car driver £59, vans £126 and Heavy Goods Vehicles £1,079 next year.
• To support Welsh pubs and smaller brewers in Wales, the UK Government is cutting duty on qualifying draught products by 1p, which represent approximately 3 in 5 alcoholic drinks sold in pubs. This measure reduces duty bills by over £70 million a year, cutting duty on an average strength pint in a pub by a penny. The relief available to small producers will be updated to help smaller brewers and cidermakers.  
• Over 600,000 Welsh pensioners will benefit from a 4.1% increase to their new or basic State Pension in April 2025. This is an additional £470 a year for those on the new State Pension and an additional £360 a year for those on the basic State Pension.
• Households eligible for Pension Credit will get £465 a year more for single pensioners and up to £710 a year more for couples due to a 4.1% increase in the Pension Credit Standard Minimum Guarantee, benefitting 80,000 pensioners in Wales.
• Around 1.1 million families in in Wales will see their working-age benefits uprated in line with inflation - a £150 gain on average in 2025-26.
• Reducing the maximum level of debt repayments that can be deducted from a household’s Universal Credit payment each month from 25% to 15% will benefit a Welsh family by over £420 a year on average.
• The weekly earnings limit for Carer’s Allowance will be increased by £45 a week from April next year, expanding support to more carers in Wales and helping them balance work and caring responsibilities. This is the largest ever increase to the earnings limit and provides certainty for carers with a commitment that the earnings limit will increase with the National Living Wage in the future.

Rebuilding Britain

This UK Government will not make a return to austerity and will instead boost investment to rebuild Britain and lay the foundations for growth in Wales. This includes £160 million of targeted funding for the Welsh Government, of which £150 million is in capital investment.

• The UK Government will deliver £88 million for City and Growth Deals, unlocking growth and investment across Wales.
• The government also confirms £80 million funding for the Port Talbot / Tata Steel Transition Board, with work already underway to support workers and businesses affected by decarbonisation at Tata Steel.
• £29 million of funding will be provided to the Welsh Government for the necessary build costs of border facilities in Holyhead and Pembrokeshire.
• Essential work being undertaken by the Welsh Government to keep disused coal tips maintained and safe will be supported by £25 million of funding in 2025/26.
• The Budget gives certainty to local leaders and investors, confirming funding for the Investment Zones and Freeports programmes across the UK - including the Celtic Freeport where tax sites will be operational from next month.
• The Chancellor committed the UK Government to working closely with the Welsh Government on the Industrial Strategy, 10-year infrastructure strategy and the National Wealth Fund - to ensure the benefits of these are felt UK-wide and as part of the relationship reset between governments. These will mobilise billions of pounds of investment in the UK’s world-leading clean energy and growth industries.
• Under-served parts of Wales will benefit from the rollout of digital infrastructure enabled by over £500 million of UK-wide investment in Project Gigabit and the Shared Rural Network.
• A corporate tax roadmap will provide businesses with the stability and certainty they need to make long-term investment decisions and support our growth mission. It confirms our competitive offer, with the lowest Corporate Tax rate in the G7 and generous support for investment and innovation.
• The UK Government will also proceed with implementing the 45%/40% rates of the theatre, orchestra, museum and galleries tax relief from 1 April 2025 to provide certainty to businesses in Wales’ thriving cultural sector.

Repairing public finances

The Chancellor has made clear that, whilst protecting working people with measures to reduce the cost of living, there would be difficult decisions required. The Budget will ask businesses and the wealthiest to pay their fair share while making taxes fairer. This will go directly towards fixing the foundations of the UK economy.

• The rate of Employers’ National Insurance will increase by 1.2 percentage points, to 15%. The Secondary Threshold – the level at which employers start paying national insurance on each employee’s salary – will reduce from £9,100 per year to £5,000 per year.
• The smallest businesses will be protected as the Employment Allowance will increase to £10,500 from £5,000, allowing Welsh firms to employ four National Living Wage workers full time without paying employer national insurance on their wages.
• Capital Gains Tax will increase from 10% to 18% for those paying the lower rate, and 20% to 24% for those paying the higher rate.
• To encourage entrepreneurs to invest in their businesses Business Asset Disposal Relief (BADR) will remain at 10% this year, before rising to 14% on 6 April 2025 and 18% from 6 April 2026-27.
• The lifetime limit of BADR will be maintained at £1 million. The lifetime limit of Investors’ Relief will be reduced from £10 million to £1 million.
• The OBR say changes to CGT will raise over £2.5 billion a year and the UK will continue to have the lowest CGT rate of any European G7 country.
• Inheritance Tax thresholds will be fixed at their current levels for a further two years until April 2030. More than 90% of estates each year will be outside of its scope. From April 2027 inherited pensions will be subject to Inheritance Tax. This removes a distortion which has led to pensions being used as a tax planning vehicle to transfer wealth rather than their original purpose to fund retirement.
• From April 2026, agricultural property relief and business property relief will be reformed. The highest rate of relief will continue at 100% for the first £1 million of combined business and agricultural assets, fully protecting the majority of businesses and farms. It will reduce to 50% after the first £1 million. Reforms will affect the wealthiest 2,000 estates each year. Inheritance Tax reforms in total are predicted by the OBR to raise £2 billion to support stability.
• From 2026-27 Air Passenger Duty (APD) for short and long-haul flights will increase by 13% to the nearest pound, a partial adjustment to account for previous high inflation. For economy passengers, this means a maximum £2 extra per short haul flight and tickets for children under the age of 16 remain exempt from APD. APD for larger private jets will be increased by a further 50%.

The Budget also announced a package of measures that disincentivise activities that cause ill health, by:

• Renewing the tobacco duty escalator which increases all tobacco duty rates by RPI+2% plus an above escalator increase to hand rolling tobacco (totalling RPI+12%).  
• Introducing a new vaping duty at a flat rate of 22p/ml from October 2026, accompanied by a further one-off increase in tobacco duty to maintain financial incentive to choose vaping over smoking. 
• To help tackle obesity and other harms caused by high sugar intake, the Soft Drinks Industry Levy will increase to account for inflation since it was last updated in 2018, and the duty will rise in line with inflation every year going forward.
• The UK Government will also uprate alcohol duty in line with RPI on 1 February 2025, except for most drinks in pubs.

The UK Government has set out the next steps to deliver its tax manifesto commitments in the July Statement. Having consulted on the final policy details where appropriate, this Budget delivers the UK Government’s manifesto commitments to raise revenue to pay for First Steps, with reforms that are underpinned by fairness, and tackle tax avoidance by:  

• A new residence-based regime will replace the current non-dom regime from April 2025 and will be designed to attract investment and talent to the UK.
• Offshore trusts will no longer be able to be used to shelter assets from Inheritance Tax, and there will be transitional arrangement in place for people who have made plans based on current rules.
• The planned 50% reduction for foreign income in the first year of the new regime will be removed.
• Reforms to the non-dom regime will raise a total of £12.7 billion according to the OBR.
• The tax treatment of carried interest will be reformed by first increasing the Capital Gains Tax rates on carried interest to 32% and then, from April 2026, moving to a revised regime – with bespoke rules to reflect the characteristics of the reward.
• The UK Government will also introduce 20% VAT on education and boarding services provided for a charge by private schools from 1 January 2025.

The Chancellor also doubled down on fiscal responsibility through two new fiscal rules that put the public finances on a sustainable path and prioritise investment to support long-term growth, and new principles of stability. Spending Reviews will be held every two years, setting plans for at least three years to ensure public services are always planned and improve value for money. 

One major fiscal event per year will give families and businesses stability and certainty on tax and spending changes, while giving the Welsh Government greater clarity for in its own budget-setting.  A Fiscal Lock will also ensure no future government can sideline the OBR again.

Published 30 October 2024