The budget: A rejection of austerity and a move toward growth

Last Wednesday was a historic moment. When Rachel Reeves stood up in the House of Commons, she was not just delivering Labour’s first budget in 14 years, but becoming the first female Chancellor of the Exchequer to do so in our country’s history.

It was also historic because it set a new direction for the UK’s ailing economy – rejecting austerity and going instead for growth and investment.

Let’s break down what it means for UNISON members.

Will it help tackle cost of living pressures?

The minimum wage has been raised significantly. One of the government’s pledges was to require the Low Pay Commission to take the cost of living into account when setting the rate and begin to close the gap between the age bands. In her budget, Ms Reeves said the national living wage would rise by 6.7% to £12.21. For young workers aged between 18 and 20, it rises even faster, from £8.60 to £10.

The budget documentation reported that the pay review body process had started in September, three months earlier than for 2024/25 as a step toward ensuring public sector workers receive more timely pay awards.

The freeze on fuel duty and the 5p cut were extended by a further year. The state pension was increased by £470 a year. And a Fair Repayment Rate has been introduced, reducing Universal Credit deductions – this will mean 1.2 million of the poorest households will benefit by an average of £420 a year.

What’s happening with taxes?

The headline announcement was an increase in employer National Insurance contributions. While some have criticised this move, it represents an honest approach to funding our vital public services. Rather than hiding behind stealth taxes or making unfunded promises, the chancellor has made the tough but necessary choice to ask those with the broadest shoulders to contribute more.

The budget also closes tax loopholes around inheritance tax reliefs and increases Capital Gains Tax on the wealthy, while protecting working people from direct tax rises. This is about creating a fairer tax system where everyone pays their fair share.

The chancellor also announced that the freeze on uprating tax thresholds in line with inflation, introduced by the Tories, will end in 2028.

What about public services?

After 14 years of underinvestment, this budget finally provides the investment our public services desperately need. The £44 billion increase in day-to-day spending represents the biggest boost to public services since 2000, with significant funding for the NHS, schools, and local councils.

This means more resources to tackle NHS waiting lists, repair crumbling school buildings and ensure councils can deliver vital local services. The £1 billion extension of the Household Support Fund will also help councils support vulnerable residents through the cost-of-living crisis.

The devolved governments will receive an additional £6.6 billion through the operation of the Barnett formula. This includes £3.4 billion for the Scottish government, £1.7 for the Welsh government and £1.5 billion for the Northern Ireland Executive.

Will this help grow the economy?

Unlike the failed experiments with unfunded tax cuts of previous governments, this budget takes a grown-up approach to economic growth. By investing in our public services and infrastructure, it lays the foundations for sustainable growth.

The £100 billion boost to public investment over five years will help modernise our infrastructure and support the transition to clean energy. Crucially, this investment in our future is being done responsibly within new fiscal rules. This means that alongside the increases in spending on day-to-day public services, there is money available for new energy infrastructure, railways and housing.

The chancellor has said there will be further announcements over coming weeks on additional measures that will help grow the economy. Later this month, she will be giving a speech about how pension funds can used to support additional investment in the UK economy.

Is there anything to be concerned about?

While this budget represents real progress, there’s still more to do. The government needs to go further on reforming the social care system and ensuring public sector workers are properly rewarded for their vital work.

The projected slow growth in living standards, while still an improvement on the last government, also shows the scale of the economic challenges the Labour government has inherited.

However, this budget marks a clear break from the past 14 years of austerity and chaos. Instead of quick fixes and unfunded promises, it provides an honest assessment of what’s needed to restore our public services and build a fairer economy.

With proper investment in public services, protection for the most vulnerable, and asking those with the most to contribute their fair share, this budget shows how different choices can lead to better outcomes for everyone. It’s a grown-up approach that puts the foundations in place for a stronger, fairer country.

The message is clear – good public services require proper funding, and this budget finally begins to deliver the investment needed after years of decline. While there’s more work to do, it represents a welcome reset after 14 years of failed policies that left our public services in tatters.