With their first Autumn Budget in fourteen years, the Labour government plans to fill the black hole in public finances with a staggering £40 billion in tax rises.

In her first Budget speech, the Chancellor, Rachel Reeves, set out a series of measures designed to face what the government says is a harsh reality for UK taxpayers and bring back economic stability.

“There will be no return to austerity,” said Reeves, a claim she repeated throughout her speech.

With plans to have a balanced budget within three years, and new rules not to borrow from taxpayers for day-to-day spending, Labour’s plan raises the question of how the new government can find the money it needs to fix what it calls a broken system, and what this implies for UK business.

Tax hikes on employers, non-doms, and capital gains (but not beer)

While the Chancellor kept the government’s election promise not to raise taxes for working people, she did announce that employer’s NI contributions are set to rise from 13.8% to 15%.

On top of that, the threshold for employers to start paying National Insurance on a worker’s earnings has been lowered from £9,100 to £5,000.

According to the government, that should net an extra £25 bn a year by the end of the forecast period, making it the biggest source of income for the public purse in the Autumn Statement.

Business rates have also been changed, with the Chancellor reforming the current system to make it ‘fairer’ by introducing a higher multiplier for the most valuable properties, including distribution warehouses used by online giants, to fund lower tax rates for retail, hospitality and leisure properties.  

Businesses have already warned that any rise in NI contributions and business rates might lead to hiring and pay freezes, and the opposition will no doubt label the increases as a tax on jobs that could have a negative impact on growth. 

As of writing, the ex-PM, Rishi Sunak, has already called the increases a ‘tidal wave’ of anti-business measures, while those in the business community itself are also voicing concerns.

“It’s disappointing to see the Chancellor moving forward with the increase in Capital Gains Tax, as this risks undercutting vital support for start-ups at a time when they need it most,” said Laurent Descout, co-founder and CEO of Neo. 

“This coupled with the national insurance hike represents a significant blow to businesses. Such moves discourage essential investment in start-ups, threatening their growth trajectory, IPO prospects and the jobs they create.”

Another source of funds is set to come from an increase in capital gains tax, which had been widely expected before today’s Budget.

The devil is in the details though, with the Chancellor revealing that the lowest rate of capital gains will be raised to 18%, while the highest rate will jump to 24%, which should raise around £2.5 bn by the end of the parliament.

That’s a relatively modest sum, but as Reeves pointed out, these rates keep the UK at the low end of the international scale, which no doubt is part of the government’s long-term plan to increase foreign investment.

The Chancellor also pledged to end the concept of non-doms, closing the loop-holes which currently plague the system to raise £12.7 bn over the next five years. Instead, the government will implement a new residents based scheme, which the Chancellor said will have ‘internationally competitive arrangements’ to encourage foreign investors to the UK.

More funds will flow from a slight increase in air passenger duty (up £2 for each short-haul flight and an extra 50% for private jets), the already announced VAT rise on private school fees, stamp duty, and a tax on vapes in line with tobacco.

On the bright side, the Chancellor did announce a cut to draught duty of 1.7%, or roughly a penny off a pint, much to the delight of MPs in the House.

Support for devolved nations and rural regions

As well as increased spending in the usual areas of defence, education, housing, transport, and the NHS, the Chancellor announced that the UK’s developed nations will receive around £6.6 billion in public financing, with Scotland set to gain the lion’s share at £3.4 bn to Wales £1.7 bn, and Northern Ireland’s £1.5 bn.

Reeves said those funds will support the delivery of public services across the country, claiming that this Budget provides the “largest real-terms funding settlement since devolution”.

Staying in Scotland, the government has said it will provide funding to deliver what it calls ‘Brand Scotland’ to champion Scottish culture, products, services, and investment opportunities, across the world, but with a budget of just £750,000, it’s not clear how far this initiative can travel.

The government is committing a lot more for expanding City and Growth Deals, however, with a package worth over £250 million going to regions across all devolved nations. 

Those outside of major towns and cities will also see something for their tax money, with the government pledging another £500 million for the expansion of broadband and mobile services across rural areas, although that does pale in comparison to the £5 billion Project Gigabit scheme which the government is counting on to do most of the work to increase nationwide broadband connectivity.

Clean, green, and looking to the future

Since even before the election, Labour said that a key part of the strategy to boost the economy was in modernising the UK’s industrial strategy, a plan that the government has already built on with the release of a green paper from the Chancellor last week.

In her Budget speech, the Chancellor said that the new industrial strategy will involve investment from a new National Wealth Fund to drive innovation in what Reeves termed ‘industries of the future’, before confirming nearly £1bn for aerospace, £2bn for the automotive sector, and over £500m in a Life Sciences Innovative Manufacturing fund.

Those investments have been met with some mixed reaction.

“The confirmation of the National Wealth Fund offers hope, signalling the new Government’s commitment to stimulating green investment,” said Stuart McLachlan, CEO and founder of Anthesis.

“However, this positive step must be viewed within a broader fiscal landscape that I fear currently gives businesses less confidence to make bold green investments. We simply will not meet our national and international targets if UK businesses do not feel adequately supported to go after them with energy and enthusiasm.”

Another chunk of taxpayer cash will go toward setting up the government’s much talked about GB Energy, the public body recently set up to invest in renewable energy projects that will be headquartered in Aberdeen.

The initiative is set to receive £125 million, not a huge sum but still significant for a public body with a vague remit, of which £100 million will be in capital funding for the 2025/26 period, aimed at clean energy project development.

That might not sound like much in the grand scheme, but the Chancellor also said that the government aims to make the UK a ‘clean energy superpower’, and announced new, multi-year investments in carbon capture and storage production technologies.

Taxpayer’s money will go to eleven green hydrogen hubs across the UK, including in East Renfrewshire, Bridgend, and Barrow-in-Furness, which the government claims will be the first commercial scale hydrogen production project in the world.

Business leaders are already saying that although they support the Chancellor’s commitment to clean energy, more should be done.

“All this will contribute to enabling the UK to become a renewable energy superpower, a much-needed step that will enable us to increase our energy security as well as meet our net zero targets,” said Simon Phelan, Hometree founder and CEO.

“However, it’s frustrating to see that the government is still not tackling the fundamentals of the electricity market, which are holding back millions of people from generating their own renewable energy through solar panels and heat pumps. 

“To truly become a renewable energy superpower we need to remove gas heating from our homes and closing the spark gap is critical to achieving this.”

Keeping things green, Reeves said that the government will preserve current incentives for EVs in company car tax starting in 2028, and from April 2025, it will widen the gap in initial Vehicle Excise Duty rates between fully electric vehicles and other types of automotives, in a measure forecast to raise about £400 million.

In the hope of unlocking future development, and for what is obviously hoped to be a source of money to come, the Chancellor set out more than £20bn in funding for the science and research sectors.

That will include £6.1bn going towards protecting core research funding in areas like engineering, biotechnology and medical science, with the government hoping for a big return on investment before the end of the parliamentary term.

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Missing from the Chancellor’s announcements was any hint of what the future of AI might look like in the UK, something which those in the emerging tech industry immediately called out.

“Companies have been patiently waiting for greater direction on how emerging technologies can be responsibly leveraged for benefit. And while digital technologies are at the heart of the UK’s vision for a modern industrial strategy, the absence of any new investment in research or infrastructure for emerging technologies like quantum or AI is glaring,” said Greg Hanson, GVP at Informatica.

From the sheer number of comments flooding in from the tech sector, it’s clear that the Chancellor’s plans don’t go far enough to either address the questions around emerging technology, or give enough indication of how the government plans to drive innovation and economic growth.

“To build a successful tech company, you need to be part of a positive, dynamic, forward-looking ecosystem,” said Cherry Freeman, Hiro Capital founder and general partner.

“But as an investor, I would now like to see the focus shift away from tweaking the tax system to really fundamentally how we drive growth.”

With her first Budget now over, and the criticisms flooding in, the Chancellor will be keeping her fingers crossed that these tax tweaks will do just that.