This was the first Labour budget in 14 years and comes after the party secured a significant majority during the General Election held in July.
Reeves started off her speech by criticising previous Conservative governments for their handling of UK finances, before outlining plans to restore economic stability, increase capital spending by £100bn over the next five years and expand opportunities for small and medium sized businesses.
In order to achieve these goals, Reeves announced plans to raise taxes by £40bn through a series of measures.
These include increasing the lower rate of Capital Gains Tax from 10% to 18%, and the higher rate from 20% to 24%, and raising National Insurance contributions by employers from 13.8% to 15%.
Meanwhile, the threshold at which businesses start paying National Insurance on worker pay will be lowered from £9,100 to £5,000. However, the amount employers can claim back on their National Insurance bill was raised from £5,000 to £10,500, meaning that 865,000 employers won’t pay at all.
The main rate of corporation tax on taxable profits above £250,000 will remain at 25% until the next election, but the tax rate paid by private equity managers on profits from completed transactions is set to rise to 32%, up from 28%.
To support workers, Reeves confirmed increases to the National Living Wage for people aged 21 or older (£11.44 an hour to £12.21) and those aged between 18 and 20 (£8.60 an hour to £10). Hourly apprentice pay will increase from £6.40 to £7.55.
It was also announced that the government will increase unfair dismissal protections and improve access to paternity and maternity leave.
In terms of news directly related to the food and drink sector, the chancellor revealed plans to cut duty rates on draught alcohol, while increasing non-draught duty rates in line with RPI.
Industry responds
Reacting shortly after the Budget was announced, Food and Drink Federation (FDF) director of corporate affairs and packaging Jim Bligh was pleased with Reeves' commitment to investing in the economy.
“Driving investment and growth is critical to ensuring the continued success of the UK’s largest manufacturing sector, and protecting the nation’s food security,” Bligh said.
“So we welcome the chancellor’s focus on a consistent, long-term approach to tax and regulation, which should help unleash the growth potential of the food and drink manufacturing industry’s 12,500 businesses.”
Bligh added that the FDF was ready to partner with the government in order to “make the most of this support”.
“Boosting investment in R&D will help the industry to create jobs, drive innovation, and grow export opportunities – resulting in a stronger industry that underpins the nation’s food security,” he concluded.
The tax increases were met with mixed responses. On the positive side, Owen Ensor, CEO and cultivated meat pet food manufacturer Meatly said that the Capital Gains Tax rise was “warranted, measured and reasonable”.
“Although fellow entrepreneurs may grumble, it is worth remembering that an effective tax system is the financial cornerstone of a civilised society, and making sure everyone pays a fair amount of tax is critical,” Ensor added.
“After all, a country with better finances on the whole is in a better position to support not just its public services but also its entrepreneurs, business leaders, startups and everything in between.”
Striking the opposite tone, George Hughes-Davies, founder of British cold pressed juice company Daily Dose, said that the Capital Gains Tax increase will discourage entrepreneurship and make investment less attractive.
"These changes make an already uncompetitive UK even less attractive for anyone looking to set up a business/manufacturing in the UK there appear to be absolutely no incentives for businesses in the UK,” Hughes-Davies commented.
Meanwhile, British Frozen Food Federation chief executive Rupert Ashby was critical of changes to the National Insurance contributions paid by employers.
“Whilst this increase was widely trailed, loading extra costs on to our members is not a welcome move,” Ashby said.
“This is yet another challenge for food producers who are still dealing with the effects of food inflation. They will have little choice, other than to pass this cost onto customers in the form of higher food prices, at a time when many people are still struggling with the cost-of-living crisis.”
On the alterations to draught alcohol duty, Campaign for Real Ale chair Ash Corbett-Collins said the industry group was pleased with the decision to cut the rate of tax on beer and cider “served in pubs, clubs and taprooms”.
“This will help pub goers as well as independent breweries and cider producers who sell more of their products into pubs, and recognises the principle that drinking in the community setting of the local pub is far preferable to the likes of cheap supermarket alcohol,” said Corbett-Collins.
However, Kingsland Drinks chief financial officer Simon Shelbourn said that taxing non-draught alcohol further “hurts everyone”.
“Whilst the government is working hard to plug the hole in the country’s finances, the consumer is being further penalised despite already bearing the weight of the cost-of-living crisis, and much of the drinks industry will once again have to prove its resilience despite being positioned to drive economic growth,” Shelbourn argued.
“The move is damaging to the industry and a setback to firms across the board who have worked tirelessly in recent years to withstand relentless taxation in the toughest of trading conditions.”
In other news, Food Manufacture has published its latest food and drink trends report, summarising all the hottest topics from 2024 with insight from a slew of industry figures.
