The first Labour Government budget in 14 years has finally been delivered by Rachel Reeves, the first female Chancellor of the Exchequer. This historic moment had been trailed in the press for weeks, with announcements around tax increases and public spending announced before the Chancellor spoke at the dispatch box. However, the devil is in the detail and specifics, particularly around education spending, have finally been confirmed.

Big tax rises for capital investment and public services

The major announcement in the budget was the increase in employers’ national insurance contributions. This will raise £25 billion, out of the £40 billion total raised through tax increases. These tax rises will not impact employees’ payslips directly but will put the burden of tax on employers. However, the impact of these tax rises will still be felt by employees as they cause lower wage growth in real terms over the next few years, according to the Office for Budget Responsibility (OBR). Following today’s budget, UK tax revenue as a share of GDP is set to reach its highest level; by 2029-30, with 38.2p in every £1 of national income being paid in tax.

Government investment in capital spending was another key focus of this budget. The Institute for Fiscal Studies has raised concerns about the levels of which this is front-loaded, leading to potential waste and inefficient spending.

There are also increases for some departments for day-to-day spending; overall day-to-day public service public spending will be up 4.8% in 2024-25 compared to 2023-24. The biggest increase is seen in the Department for Health and Social Care, with the NHS day-to-day budget increasing by a significant £22.6 billion.

Education spending

For apprenticeships, the Chancellor announced a £40 million investment as part of initial steps to transform the Apprenticeship Levy to the Growth and Skills Levy, to support the commitment of delivering shorter and foundation apprenticeships in key sectors. However, it is not clear whether this £40 million will come from the current apprenticeships budget or will be from new funding.

The Government has also announced it is delaying the Lifelong Learning Entitlement, which has been pushed back to January 2027. Once this is delivered, it will expand the access adults have throughout their working lives to flexible education and skills training. Significantly, there was an increase to the National Minimum Wage for apprentices, rising from £6.40 to £7.55.

Meanwhile, the big announcement for further education was £300 million additional funding to ensure young people develop their skills and plug the skills gaps that are holding back economic growth. However, the Treasury’s budget documents do not reveal specifically how this additional cash is being earmarked, and it will be up to the Department for Education (DfE) to decide how the money is spent. One suggestion is for this money to be utilised for college pay increases.

Reeves also announced there would be a £6.7 billion capital investment for the education system in England for 2025-2026, including £950 million for skills capital with £300 million allocated to support colleges, helping maintain, improve, and ensure the suitability of their estates.

More broadly, the Chancellor announced increased spending for the DfE, including for childcare provision, school buildings, SEND provision and breakfast clubs.

Conclusion

This was a big budget for the new Government, and it will set out much of the agenda for the rest of this parliament. The Chancellor is raising taxes to record levels and increasing public investment by billions, hoping this will stimulate economic growth. A big bold budget with lots of potential for both risk and reward, the impact of which will be felt over the coming years.