ICAEW’s Fiscal Insight on the Autumn Budget 2024 provides an analysis of the changes to the current financial year since the Spring Budget, the budget for the 2025/26 financial year and the Office for Budget Responsibility’s medium-term forecast up to 31 March 2030. It looks at the £1.2tn the government will need to borrow over the next five years, the changes to the fiscal rules and the risks to the fiscal forecasts.

Key points highlighted in the Fiscal Insight include:

Headlines

• Chancellor replaces inherited austerity plan with a more realistic path for public spending.
• Effective reversal of previous government’s tax cuts on top of typical post-election tax rises.
• Higher borrowing used to fund public investment.

Significant revision to current financial year

• Estimated full-year deficit revised up to £127bn or 4.5% of GDP, £40bn over budget.
• Higher debt interest and £22bn ‘black hole’ pushing up spending in this and future years.
• Additional funding for local government staves off bankruptcies in the short term.

Budget for 2025/26

• Further boost to current spending and investment ahead of three-year Spending Review.
• Receipts £1,229bn (41.7% of GDP) - spending £1,335bn (45.3%) = deficit £106bn (3.6%).
• Per capita receipts £1,475 - spending £1,600 = a deficit of £125 per person per month.

Fiscal outlook to 2029/30

• Fiscal deficit projected to fall to £71bn or 2.1% of GDP by the end of the decade.
• Gradual contraction in public spending as a share of GDP from 2026/27 onwards. 
• Net debt projected to reach £3.0trn by March 2027 and approach £3.4trn by March 2030.

Conclusions

• Post-election tax rises were inevitable, but these were bigger than usual.
• Badly designed fiscal rules replaced, but flaws still exist.
• Lack of ambition to reform the tax system is a major disappointment.
• Difficult decisions remain for both taxes and public spending.
• Public finances remain fragile; no sign of a long-term fiscal strategy.

Alison Ring OBE FCA CPFA, ICAEW Director for Public Sector and Taxation, says in the Fiscal Insight: “Chancellor Rachel Reeves used her first Budget to upgrade the medium-term outlook for the public finances from ‘weak’ to ‘fragile’, raising taxes over the next five years to avoid the austerity that was embedded into the spending plans she inherited from the previous government.

“As expected, borrowing will be higher following the change in the Chancellor’s debt rule, which we were pleased to see given that it increases her ability to invest, as we had called for. The Chancellor’s ‘stability rule’ will limit the amount she can put into raising public investment, so the government must get a grip on major capital expenditure programmes to get value for money.

“Despite the extra money for both day-to-day spending and public investment, budgets will remain tight with some very difficult choices still to be made in next year’s Spending Review. The Chancellor will also be aware that there remains a lot more to do over the course of the Parliament to address the long-term fiscal challenges facing the UK.”

Our Autumn Budget 2024 Fiscal Insight report can be found here. 

For further coverage, including more detailed information about tax measures, visit our Autumn Budget 2024 site by clicking here.