Budget 2024 – latest: Inflation falls to lowest rate in three years, Reeves ‘eyes £40bn’ in cuts and spending

UK inflation has decreased to below the 2 per cent target for the first time in over three years.

The consumer price index (CPI) has dropped to 1.7 per cent, down from 2.2. per cent in August, according to the Office for National Statistics.

The figure has beaten expert predictions, which largely estimated a more modest drop to 1.9 per cent.

Ahead of the Budget on 30 October, it has been revealed that a trial is underway where unemployed people will be given weight-loss jabs to assist them back into work.

The UK’s life sciences sector will receive £279 million from drugs giant Eli Lilly, to invest in developing new medicines and ways to deliver treatment.

“The long-term benefits of these drugs could be monumental in our approach to tackling obesity. For many people, these jabs will be life-changing, help them get back to work and ease the demands on our NHS,” health secretary Wes Streeting wrote in The Telegraph.

Rachel Reeves has been boosted by a sharp drop in inflation as she seeks to find £40bn of tax hikes and spending cuts in this month’s Budget.

The chancellor will welcome the dip, which saw inflation fall under the Bank of England’s 2 per cent target for the first time in more than three years, as she prepares for what promises to be a brutal Budget.

Labour came under criticism in recent days after several ministers refused to rule out that an increase in employer national insurance contributions (NICs) will be announced in the upcoming budget.

Ministers and Treasury officials have indicated the government’s position is that the measure would not break their manifesto pledge. Meanwhile, Institute for Fiscal Studies director Paul Johnson has argued it would be a “straightforward breach.”

Here are the facts about the debate and how the measure could affect you:

Rachel Reeves has been warned that hiking employer national insurance contributions would be “a straightforward breach” of the Labour manifesto.

The chancellor has been told by Paul Johnson, director of the influential Institute for Fiscal Studies (IFS), that the party said “very clearly” it would not make the change.

Inheritance tax is a levy on the estate of someone who has died. This is their property, money and possessions. Crucially, it is not paid if the value of these things is below £325,000.

The tax rate is 40 per cent, but it’s only charged on the part of the estate that’s above the threshold. In 2023/24, only 5 per cent of deaths generated an inheritance tax bill, raising around £7 billion.

However, the IFS writes that the tax measure “is littered with special exemptions”. These include a business relief, the ability to pass on agricultural land tax-free, and the tax-free passing on of pension pots.

The economic think tank says that ending these measures alone would raise £4.8bn a year by 2029.

We would like to hear your thoughts on what you would like to see introduced in Reeves’ Budget. Should she focus on measures to support homeowners, such as the Freedom to Buy scheme? Or would you prefer a focus on closing tax loopholes, such as abolishing non-dom status, to ensure a fairer tax system?

Share your views:

Pension tax relief is a reduction of the amount of tax paid on private pensions. It helps workers save for retirement by boosting their pension pots.

The amount of tax relief a person is granted is based on their income tax. It will effectively cancel out tax on pension contributions up to a maximum of £60,000.

After this, contributions will be taxed at either 20, 40, or 45 per cent, depending on which income tax rate the worker falls into.

However, the chancellor is thought to be considering a flat 30 per cent pension tax relief rate. This would mean that higher earners would effectively pay 10 per cent in tax, while those on the additional rate would pay 15.

The measure would raise around £3 billion a year, with 7 million earners paying more tax. But it would be better news for basic rate earners, who would actually begin to receive a 10 per cent boost to their pension contributions.

Evaluating the idea last year, the IFS said it would “redistribute the burden of taxation from the bottom 80 per cent to the top 20 per cent of earners.”

It has been reported that Rachel Reeves is considering tweaking Capital Gains Tax at the 2024 Budget.

Capital Gains Tax (CGT) is paid on the profit made when an asset which has increased in value is sold. It is applied to things like the sale of personal possessions worth more than £6,000 (apart from a car), property that’s not the seller’s main home, shares and business assets.

It is charged at 10 or 18 percent for basic rate taxpayers, and 20 or 24 for higher or additional rate earners. There is a tax-free allowance of £3,000.

There are several ways CGT could be changed. In the run-up to the election, the Lib Dems and Greens both said they would rethink the tax bands to be more similar to income tax, raising an estimated £5.2bn a year.

Exclusive: Former Bank of England governor Mervyn King has made a dramatic intervention warning Rachel Reeves that she must raise national insurance in her Budget on 30 October.

The Independent’s political editor David Maddox reports: