Additional reporting by Gerry Warren & Rhys Griffiths
After all the speculation and leaks, Chancellor Rachel Reeves has delivered her first Budget…but what does it mean for you and the people of Kent?
Although the government has stressed it has not hiked taxes for ‘working people’, some describe it as “giving with one hand, taking with another”.
If you run a small business, you’re going to be paying more for each of your employees after a hike in employers’ National Insurance contributions. That could prove a step too far for many. But there is a promised reform of business rates which could ease pressure on our high streets.
Bus fares are going up too, from its current £2 single fare price cap to £3, and tobacco duty is also on the rise, with the tobacco duty escalator increasing by inflation plus 2%. Hand-rolled tobacco will go up by 10% and there will be a flat-rate duty on vaping liquid from 2026.
But, despite expectation, there will be no rise in beer duty – in fact, it will be cut, eroding a penny off the cost of a pint at the pumps – and the freeze on fuel duty will continue.
It is worth bearing in mind many of the changes, particularly in relation to pay, will not come into force until April 2025 – the start of the next financial year. So if you benefit from hikes in the minimum or National Living Wage, don’t expect to feel the impact in your pay packets just yet.
In addition, there will be further details on each policy revealed when the full Budget documentation is published. That may put more meat on the bones of many of the headline topics the Chancellor announced at the despatch box today.
Wages
Politics is always a case of give and take. The good news, for many, is that the National Living Wage (for those aged 21 and over) is rising from £11.44 to £12.21 an hour by 6.7%.
The National Minimum Wage, for those aged 18-20, will also be hiked from £8.60 to £10 – up 16.3%. Apprentices will see wages rise from £6.40 to £7.55 an hour.
All will come into force next April.
Ollie Bowles, a 20-year-old apprentice worker from Hastingleigh, near Ashford, welcomed the changes.
“It’s good that people will be getting a pay rise,” he said.
“The minimum wage isn’t exactly a lot of money so I’m glad to see it’ll be going up.
“Young people in their first jobs out of school work hard, so I don’t see why we shouldn’t be paid closer to what older people earn in the same jobs.”
Tax brackets will stop being frozen from 2028-29 and rise in line with inflation. This will reduce the threat of what’s known as ‘fiscal drag’ – where wage increases mean people topple into paying higher taxes, be it through income tax or National Insurance.
What does that mean? Well, if you currently earn £30,000 you get £12,570 of that tax-free as what’s known as your personal allowance.
So, in effect, you’re taxed at 20% on £17,430.
But if that personal allowance had increased in line with inflation, then that may have increased to £15,000, which means you’d only be paying tax on £15,000. That’s close to an extra £500 in tax each year. That discrepancy – coined by some as a ‘stealth tax’ – will now end. But not quite yet.
There was, as promised in Labour’s election manifesto, no rise in income tax, National Insurance or VAT for workers.
However, there was a 1.2 percentage point rise in National Insurance contributions from employers to 15%.
But the threshold at which businesses start paying National Insurance on workers’ earnings will be lowered from £9,100 to £5,000. This, she says, will mean one million small companies pay less or the same as before.
Canterbury Food Bank trustee David Holt says the Chancellor appears to have given with one hand and taken away with another for hard-up people.
“The increase in the minimum wage is, of course, welcome and will benefit the low paid,” he said
“But we have also seen an increase in bus fares, which impacts their budgets when travelling to work or for things like job interviews.
“Then there’s the cut in the winter fuel allowance, which is hurting many of our older clients.
“So what we appear to have is a budget that is giving with one hand and taking away with another.”
Hospitality sector
Unacceptable pain is being piled on the hospitality industry, which has suffered a double-whammy hit in the Budget, says the owner of an award-winning Kent gastro pub. Although the sector will benefit from an extension in business rates relief.
There was also the shock decision to drop beer duty – effectively cutting a penny off the pint at the pumps.
Marc Bridgen, who runs The Dog at Wingham, fears it could lead to more closures as businesses now have to soak up extra employers’ national insurance contributions and the increase in the minimum wage.
“We are already under the cosh with the huge rise in utility bills and massive food inflation so this is a real hammer blow as we fight to keep our heads above the water,” he said.
“The business employs almost 30 people so an increase in our NI contributions and minimum wage will add hundreds of pounds to our monthly running costs.
“It just feels like more pain is being piled on the pain we’re already suffering.
“Then there’s the impact on customers’ personal spending, who feel they may need to cut back, which will also affect us because there’s only so much that we can reasonably pass on to them to cover our growing costs.
“I don’t know how much more the government thinks that the hospitality industry can take, and it can’t be good for the economy if businesses are forced to close and jobs are lost.”
The owner of a traditional tea room in Canterbury city centre says there is nothing in the Budget to support or encourage small businesses.
“It’s very disappointing for businesses like ours who are already facing escalating overheads,” said Wojciech Skibin, who runs Tiny Tim’s in St Margaret’s Street.
“Although a burden, we will just have to have to absorb the extra costs, although I don’t begrudge paying my staff a fair wage because their cost of living is going up and they have bigger bills to pay.
“But pre-election it was said there would be no increase in National Insurance. What it does is discourage any ambition for growth so I would think twice about opening another cafe.
“But the fact is that small businesses are the backbone of the community, despite being hugely disadvantaged by the buying power of the big boys.”
Eductaion
The much-expected introduction of VAT on public school fees will be introduced in January. This will mean an increase of up to 20% – although it remains to be seen how schools will absorb that increase.
Business rates relief on public schools will also be phased out over the next two years.
Rachel Bailey, head of £50,000-a-year Benenden School, said: “The government’s imposition of VAT on independent school parents is deeply disappointing and I am sad that we are one of the only countries in the world to tax education.
“This will only make independent education even more expensive, serving to increase the divide between independent schools and state schools.
“Benenden is fortunate to be in the position where it can ride out this short-term challenge, but this tax will, sadly, signal the death-knell for many smaller schools whose communities value them dearly.”
For the state sector, the core schools budget will increase by £2.3bn, while there will be a tripling of investment in breakfast clubs run by schools.
There will also be £6.7bn of capital investment into the Department for Education. That will include £1.4bn to rebuild over 500 schools nationwide.
There’s also a vow of an additional £1bn for those with special education needs.
Fuel duty
Much to the surprise of many, the freeze on fuel duty – introduced in 2011 – will continue. As will a 5p discount on the price of a litre of fuel. That means no imposed price hikes at the pumps.
Howard Cox, the Cranbrook-based founder of FairFuel UK, said: “I am delighted that Rachel Reeves has listened to FairFuelUK supporters and the constituents of her party’s MPs.
“She finally recognises that keeping fuel duty frozen is at the core of a laudable journey to economic growth. So, Rachel, that’s a great start. But please don’t rest on your laurels.
“Let’s build the first-ever road-user transport strategy that benefits the economy without your party’s false and emotional, scientifically baseless belief that the UK is the only country to save the planet and the motorist is to blame for all the environmental ills.
“That costly brainwashing must stop now. Start incentivising the UK’s 37m drivers and stop seeing them as an easy cash cow.”
Bus fares
Since January 2023, bus passengers in Kent have enjoyed cheaper journeys thanks to the introduction of the £2 fare cap by the previous Conservative government.
But travel costs are set to rise following the announcement that the cap will increase by 50% to £3 for a single journey, with the new capped fare due to come into effect on January 1, 2025.
The decision has been met with dismay from passenger lobby group Bus Users UK.
Claire Walters, the organisation’s chief executive, told KentOnline she is “bitterly disappointed” by the decision to hike fares, which she says will have the biggest impact on the low-paid and those working in more precarious sectors of the economy.
“This undermines their own desire and their priorities to make transport more affordable,” she said. “It could have been worse, but it doesn’t mean it’s not bad for a lot of people.
“It sounds dramatic, but if you imagine them hiking petrol prices by 50%, people would be out with pitchforks. Buses are the backbone of sustainable transport and it just seems such an odd thing for this government, with what they’ve talked about, to lead with.”
Although some shorter journeys can still be made for less than the fare cap, for many longer journeys between towns it has meant significant savings for bus passengers.
Charlotte Bowles, 27, travels almost every day by bus and says she was shocked when the increase was revealed.
“There was no mention of it during the election and it’s going to especially hit those on lower incomes,” she said, speaking at Canterbury bus station.
“I live in Herne Bay, my nine-year-old daughter goes to school in Whitstable and my mum lives in Canterbury, so the bus is vital for me.
“But if I use it five times a week, that means the cost is going to go up from £20 to £30 for return journeys, which is quite significant when you are managing on a budget. It really is very disappointing.”
Funding for the fare cap allocated by the previous government is to expire at the end of this year, and the new Labour administration argues that the new £3 cap represents an extension of relief for passengers – albeit at a higher rate than before.
A spokesman for Stagecoach, which operates buses in the east of Kent, said: “We acknowledge the government’s announcement of a new £3 bus fare cap and welcome the clarity it provides.
“We look forward to working with the government to understand the details of the new scheme in the coming days and weeks. Our goal remains to provide reliable and affordable transport options that benefit our communities.”
Health
There will be a £22.6bn increase in the day-to-day health budget, Rachel Reeves has promised, and a £3.1bn increase in the capital budget this year and next.
She insists this will bring down waiting lists and increase capacity for treatments.
She also confirmed £11.8bn has been allocated to compensate both the “infected and affected” of the Infected Blood Scandal.
Among the victims of that were Ramsgate couple Steve Dymond and his wife Su Gorman. Steve died from complications caused by being infected with blood used to treat his haemophilia when he was a youngster.
His wife, who was not infected but confessed they had not had children as a result of his condition, survived him, but died last year – without seeing the end of the inquiry into the scandal.
