Higher taxes all around, but some positive spending too 

Chancellor Rachel Reeves has confirmed a significant hike in taxes affecting employers, landlords, wealthy property owners, pensioners and those planning for succession. However, she also found the fiscal headroom for some positive capital spending announcements.

With the OBR forecasting higher growth than expected for 2025-26 and the outlook for inflation improving, the Chancellor has been able to announce some important spending decisions, some of which could bring long-term benefits. However, cash-strapped local authorities have missed out on more capital spending and other sectors will feel that current funding levels are unsustainable, for example, social care services.

The announcement made on the eve of the Budget about plans to increase the national minimum wage by 4.1 percent from April will hit social care providers hard, particularly as many have already been forced to absorb other increases in employment-related costs recently. Whilst most providers want to remunerate their staff in a way that reflects their long hours and hard work, without aligned increases in commissioning rates or targeted support, more social care providers will face difficult decisions and some could close. 

Make way for new Neighbourhood Health Centres

On a more positive note, the Chancellor announced plans to invest £300 million in new technology for the NHS to improve patient care and also confirmed plans to create 250 new Neighbourhood Health Centres, with the first 100 to be created by 2030.

Whilst social care providers will be disappointed that additional funding hasn’t been made available to support service provision and offset higher employment costs, confirmation of a new funding model to replace NHS England is good news. Whilst joined-up, devolved commissioning authorities have long been a goal, in reality the current mix of ICBs and integrated care systems have been neither effective nor efficient. 

This announcement about plans to establish Neighbourhood Health Centres should facilitate easier access to key services. It is only by investing in proper, community-based infrastructure that access to services can improve and investing in preventative measures will not only improve public health but reduce pressure on the NHS. We will have to wait for the detail about how these services will be tailored to meet the needs of their local population. 

Support for under 25 apprenticeships and a new ‘youth guarantee’

The Chancellor confirmed plans to making training for under 25 apprenticeships free for small and medium sized enterprises. She also announced funding of £820 million for a new ‘youth guarantee’ to ensure that every young person is guaranteed a college place, apprenticeship or personalised job support. 

This support will benefit SME employers greatly, many of whom have been forced to reduce their headcount or otherwise look to trim their employment bill following the recent increase in Employer NICs. Over time, these initiatives will support their growth and strengthen their skills base.

CGT exemption for Employee Ownership Trusts cut by 50%

The Chancellor’s decision to make Employee Ownership Trusts (EOTs) liable for Capital Gains Tax was not expected and is disappointing news for those involved in supporting social enterprise, particularly given their success in driving the growth of mutuals.  

The Government risks disincentivising EOTs for a marginal financial gain, which given the manifesto commitment to double the size of the co-operative and mutual sector seems counterproductive. The call for evidence on co-operative growth is welcome, but further concrete steps are needed. Based on this decision, future fiscal incentives for fairer ownership models can’t be guaranteed.