Budget 2024 latest: Huge boost for Reeves as IMF growth forecast rises after inflation battle ‘largely won’

Rachel Reeves is considering raising the tax on vaping products in the upcoming Budget as figures lay bare how many children access them in the UK, The Guardian reports.

The tax on vaping products was originally announced by the Conservatives in March, to come in to force in 2026. It is now understood that Ms Reeves could look to increase this.

Under current plans, the new rates from April 2026 will range from £1-3 per 10ml of liquid, depending on nicotine level.

Rachel Reeves will seek to make around £3 billion of cuts to welfare over the next four years by restricting access to sickness benefits, it is understood.

The Chancellor is expected to commit to the previous Tory government’s plans to save the sum by reforming work capability rules, as first reported by The Telegraph.

Under Conservative proposals, welfare eligibility would have been tightened so that around 400,000 more people who are signed off long-term would be assessed as needing to prepare for employment by 2028/29, reducing the benefits bill by an estimated £3 billion.

It is understood that Ms Reeves will commit to the plan to save £3 billion over four years, but Work and Pensions Secretary Liz Kendall will decide how the system will be changed in order to achieve this.

There have been rumours Labour could tweak the fiscal rules the Government uses to constrain its own spending and tax decisions.

Chief among those under consideration for change is the period over which the Government aims to see national debt falling as a percentage of the UK’s overall economic output.

Relaxing this rule to a longer period than the current five-year target, or removing spending by certain public organisations from the total, could allow the Chancellor to borrow more cash to invest in major infrastructure projects such as railways, roads, hospitals and new prisons.

Public services including the NHS and local councils are struggling across the UK, as they grapple with an ageing population, backlogs caused by the pandemic, and the aftermath of the coalition-era austerity programme.

Labour has brokered a pay deal for a swathe of public servants after several years of industrial action, a spending commitment worth £9 billion by some estimates.

Ms Reeves has also claimed the previous Conservative government did not account for the costs of some of its promises, which now need to be met or scaled back.

These commitments, alongside keeping the Government’s ongoing costs “standing still”, made up the so-called £22 billion “black hole” in the public finances which Labour said it needs to fill.

However, Ms Reeves is said to have since identified a far larger £40 billion funding gap which she will seek to plug to protect key departments from real-terms cuts and put the economy on a firmer footing.

The wider benefits of scrapping the two-child limit such as the future earnings potential of young people who avoid poverty as a result are being ignored, a think tank has said.

Prime minister Sir Keir Starmer has faced pressure, including from some of his own Labour MPs, since being elected in July to scrap the controversial Conservative policy but has insisted he cannot do so in the current economic climate.

The New Economics Foundation (NEF) said its UK-wide analysis suggests that retaining both the two-child limit and the benefit cap – which a number of campaigners have said should also be axed – could see almost half (49.4%) of families with three or more children living in relative poverty after housing costs by the end of this Parliament five years from now.

Scrapping both from April 2025 could cost the Government £2.5 billion a year, rising to £3.5 billion by 2029/30, the organisation said.

Much of these costs are taken up by the two-child limit at £1.9 billion and £2.6 billion respectively, the NEF said, but it argued this would be “significantly offset by short, medium and longer-term economic gains”.

Liberal Democrats deputy leader Daisy Cooper said the party will oppose the increase of national insurance contributions for employers, if the rumoured policy is in the Government’s Budget later this month.

The party’s Treasury spokeswoman said she was worried about the impact on care providers, which could send some from a state of “crisis to collapse”.

Speaking to Trevor Phillips on Sky News, Ms Cooper said: “I think we are deeply uncomfortable about that proposal.

“One of our concerns in particular is that there are many very small care homes and small care providers around the country, and they… are on the cliff edge as it stands.

“If the Government were to put up employer contributions, particularly for these small businesses, for these small care homes, I think we might see many of them go from a state of crisis to a state of collapse with no choice but to close their doors.”

She went on to say: “The rumour as it stands is that the Government intend to raise the national insurance contributions on all companies, irrespective of whether they’re small or large… I think we probably end up having to vote no against that.”

Scotland’s First Minister will use a speech on Monday to urge the Chancellor to increase spending, as he said the Budget presents a “make or break moment” for the UK.

First Minister John Swinney is expected to make his most outspoken intervention on the budget and push the Chancellor to invest in public services.

Speaking at an event in Edinburgh on Monday in front of academics, think tanks and representatives of the private, public and voluntary sector, the First Minister is expected to describe the past seven years – which has seen Brexit, the pandemic, the war in Ukraine and the subsequent energy price and inflation hikes – as a “long, dark economic winter”.

He will add: “What is needed now is a collective commitment to public investment for economic renewal, investment that will allow us to move into an economic spring, with new growth, new opportunities and new hope.”

Wes Streeting said he had reached a deal on NHS funding with the Chancellor, but could not fix the problems of the last 14 years in one Budget.

Asked about potential funding increases at the Budget, the Health Secretary told Sunday Morning With Trevor Phillips: “I’m not going to get into specific figures.

“I’ve settled with the Chancellor, but we are not going to fix 14 years in one Budget.”

He also stressed the need for reform as well as investment in the NHS, saying he was “conscious” that money spent on health was money that could not be spent in other areas.

He added: “There isn’t a single part of Government and the public sector where there aren’t real crises.”