The Chancellor, Rachel Reeves, has announced the new Government's first Budget. As you will likely have seen reported, it is one of the most significant fiscal events in years, with spending and tax increases larger than generally expected. £40bn of tax rises were announced to meet both what the Chancellor says were unfunded spending from the previous government and an overall increase in both government investment and day-to-day spending.
We are still digesting the numerous announcements and policy changes, but a broad overview of the announcements that are most relevant to the ports industry are below.
Economic Forecasts
The Office for Budgetary Responsibility (OBR) say that the Budget "delivers a large, sustained increase in spending, taxation, and borrowing", increasing spending by almost £70 billion a year over the next five years, of which two-thirds goes on current and one-third on capital spending. The OBR say that the size of the state is therefore forecast to settle at 44% of GDP by the end of the decade, almost 5 percentage points higher than before the pandemic. Half of the increase in spending is funded through an increase in taxes, mainly on employer payrolls, on assets, and through greater tax compliance. The other half of the increase in spending is funded by a £32 billion a year increase in borrowing, one of the largest fiscal loosenings of any fiscal event in recent decades.
On future growth, the OBR say that after stagnating last year, the economy is expected to grow by just over 1% this year, rising to 2% in 2025, before falling to around 1.5%. The OBR say that "Budget policies temporarily boost output in the near term, but leave GDP largely unchanged in five years".
Tax
National Insurance
Following speculation, the Chancellor announced that the bulk of the additional £40bn in tax rises will be from increased Employer National Insurance contributions.
The rate of Employer National Insurance contributions will by 1.2 percentage points to 15%. The Secondary Threshold is being cut to £5,000 (from £9,000) until 5 April 2028 and uprated with CPI thereafter. The Employment Allowance is being increased to £10,500 (from £5,000) and the £100,000 eligibility threshold is being removed. There will be an allowance for the impact on public sector organisations. The Treasury say this will raise an additional £25bn a year by 2029-30.
We would very much welcome input from members on the impact this will have on your organisation and your future plans, if any.
Corporation Tax & Reliefs
On corporation taxes and capital allowances, the Government is:
capping Corporation Tax at 25% for this Parliament, whilst committing to monitoring equivalent taxes in other countries to ensure the UK's regime remains competitive.
maintaining the Small Profits Rate (19%) for profits up to £50,000 and maintaining marginal relief at their current rates and thresholds. Marginal relief tapers increases for businesses with profits between £50,001 and £250,000, after which the main rate of corporation tax applies.
maintaining the full expensing regime introduced on a permanent basis by the previous government, as promised during the election. Other elements of the UK's capital allowances regime will also be maintained, including the £1m Annual Investment Allowance. The government say they are exploring extending the full expensing regime to cover assets that are bought for leasing or hiring and exploring how to provide greater clarity on what qualifies for different capital allowances. A consultation will also be launched on capital allowances in the coming months that explores the tax treatment of predevelopment costs. The government will also extend for a further year the 100% First Year Allowances (FYA) for qualifying expenditure on zero-emission cars and the 100% FYA for qualifying expenditure on plant or machinery for electric vehicle charge points, to 31 March 2026 for corporation tax purposes and 5 April 2026 for income tax purposes. Maintaining the full expensing regime was one of the BPA's seven Budget asks, so we welcome this news.
launching a consultation to review the effectiveness of Land Remediation Relief, which provides tax relief on corporation tax for the costs involved in cleaning up contaminated or derelict land and preparing it for redevelopment. The BPA will consider whether it is appropriate making the case for this to be extended to marine areas and would welcome views from members.
The Government has also published a Corporate Tax Roadmap which explores a new process for advanced assurance for major projects and simplifying and improving tax administration, which will develop a new process that will give investors in major projects increased tax certainty in advance. There will be a consultation in spring 2025.
Other Tax Changes
The Government expects to raise an additional £2.5bn a year by 2029-30 with an increase in Capital Gains Tax (CGT). The main rates of CGT will rise from to 18% and 24% from 30 October 2024, and the Business Asset Disposal Relief (BADR) and Investors’ Relief (IR) rate will rise to 14% from 6 April 2025 and to 18% from 6 April 2026.
The Chancellor is permanently lowering the business rates multipliers for retail, hospitality and leisure (RHL) properties from 2026-27. The small business multiplier is being frozen for a year. The Government have published a discussion paper setting the direction of travel for transforming the business rates system in England. We will review this document in due course but would welcome thoughts from members.
From 1 November 2024, the Energy Profits Levy (EPL) rate will rise by 3 percentage points to 38%. The EPL was introduced in May 2022 to tax the "extraordinary profits" of oil and gas companies. As well as raising the rate, the investment allowance will be abolished, and the rate of the decarbonisation allowance will be set at 66% so its cash value is maintained. The government say they will make no additional changes to tax relief available within EPL (e.g. capital allowances) and will consult with the sector once the levy ends on 31 March 2030 about how future oil and gas profits are taxed during energy price shocks.
The 5p cut in fuel duty will be extended for a further 12 months and the planned increase in line with inflation for 2025-26 will be cancelled.
The government confirmed the previously announced adjustment to Landfill Tax rates from 1 April 2025. Our understanding is that dredging spoil sent to landfill will remain exempt, following a consultation on the matter last year.
See the full Treasury Red Book for the full list of tax changes.
Spending
Spending Review
As announced last week, the Chancellor has changed the Government's 'fiscal rules' to allow more room for borrowing. The Treasury say that part of its new guiding fiscal principles includes a move towards only borrowing for investment, and to keep debt on a sustainable path. There are two new fiscal rules:
Stability rule: to move the current budget into balance so that day-to-day spending is met by revenues
Investment rule: to reduce net financial debt as a share of the economy
There will also be a move away from five-year targets and return to having one major fiscal event a year. The Treasury are also introducing 'guardrails' to strengthen controls on public spending on financial assets, such as loans and equity. One of the core principles will be that new financial transactions should generate a return at a portfolio level that at least covers their cost of financing, or when they do not, the costs of loss-making investments will be transparently recognised in departmental budgets.
The Government have also committed to hold a spending review every two years, setting departmental budgets for a minimum of three years. Alongside the Budget the government published the outcome of 'phase one' of its spending review. Spending reviews set out the capital and operational budgets of Whitehall departments (and consequently, funding for devolved administrations) and are usually taken every three or five years. Phase one of this spending review announced resource budgets for next year as well as an additional £100bn of capital spending over the next five years (see next section). Phase two starts immediately and will conclude in spring 2025, setting out longer-term and more detailed plans for government spending. It will be published alongside a 10-year infrastructure strategy and government say it will take a "mission-led, reform-driven, technology-enabled approach to funding public services while investing in long-term growth". Phase two of the spending review will be important for the BPA's priorities as it will cover longer-term spending for connectivity funding and other priorities. The details of what overall spending limits will cover is also important to us, as we are keen to ensure that the DfT and other departments fund or continue to fund programmes that we see as important, such as UK SHORE.
All devolved government settlements are growing in real terms in 2025-26 and the government say that settlements for 2025-26 are the largest in real terms of any settlements since devolution. The devolved governments will receive an additional £6.6 billion through the operation of the Barnett formula in 2025-26. This includes £3.4 billion for the Scottish Government, £1.7 billion for the Welsh Government and £1.5 billion for the Northern Ireland Executive.
Departmental Spending
Department for Transport
£bn
2023-24
2024-25
2025-26
% Change
Resource Expenditure
7.9
8.2
8.2
-0.7
Capital Expenditure
22.1
20.6
21.8
3.1
Total Expenditure
30.0
28.8
30.0
-2.5
The DfT will see its real term resource spending cut next year by 0.7% on last years number by 0.7%. Capital spending will also fall in the same period in real terms by 3.1% to £22.8bn. The Treasury say this reflects funding for HS2 and several other one off increases in 2023-24.
The Treasury say the drop in resource spending also reflects one off pressures in 23/24. The DfT settlement includes:
An additional £500m next year for road maintenance in England
Confirmation of HS2 phase one between London Euston and Birmingham
Progressing key strategic road schemes such as the A47 and A57 and confirmation that the third Road Investment Strategy will be set out in the spring of 2025 alongside phase two of the spending review.
The cancellation of several road schemes the government say were unfunded and do not provide a clear value for money investment case. These include the A5036, next to the port of Liverpool, J8 of the M27 outside Southampton, the A47 at Great Yarmouth and of course the A1 (it seems to have become a tradition that the dualling of the A1 will either be funded or cut; in the last 15 years £67m has been spent on the project without a single metre of road being built).
Ports and maritime are not mentioned at all anywhere in the three pages of notes on the DfT spending settlement.
Department for Energy Security & Net Zero
£bn
2023-24
2024-25
2025-26
% Change
Resource Expenditure
1.3
1.6
1.9
8.8
Capital Expenditure
5.1
7.5
8.4
25.2
Total Expenditure
6.4
9.0
10.3
22.0
The DESNZ settlement says it will provide '£134 million to support the delivery of port infrastructure to facilitate floating offshore wind'. We assume this is FLOWMIS, although we had thought that was budgeted for 2024-25 rather than 2025-26 and the figure that was awarded was higher (but could have been reduced during fire diligence). We are seeking more information on this with government.
GB Energy, the Government’s new energy company, has been given £100m of capital funding for 2025-26 for clean energy project development and £25m to establish itself in Aberdeen. Investment activity will be taken by the National Wealth Fund (reminder: the UK Investment Bank has now been rebranded as the NWF) whilst GBE is established.
Also in the DESNZ settlement:
£3.9bn for the first carbon capture and storage clusters in the UK
Unquantified support for “clean energy industries” including the first round of hydrogen production contracts and £163m to continue the industrial energy transformation fund through to 2027-28.
Confirmation of funding to continue development of Sizewell C with a final investment decision to be taken in phase two of the spending review
Department for Business & Trade
£bn
2023-24
2024-25
2025-26
% Change
Resource Expenditure
1.6
1.8
1.8
3.7
Capital Expenditure
1.0
1.7
1.5
19.8
Total Expenditure
2.6
3.5
3.3
10.0
DBT’s settlement for supporting industry includes:
Support and delivery of the Government’s industrial strategy. This includes investment in some of the sectors already identified as “growth driving” sectors.
Confirmation of support for the transformation of the steel and other energy intensive industries
Support for SMEs including £1bn for the British Business Bank to enhance access to finance for small businesses
On international trade, DBT’s funding settlement includes £500m for:
Increasing trade policy capacity to support trade negotiations and deliver the Government’s Trade Strategy
Supporting inward investment with an expanded Office for Investment and a new bespoke service for investors
Ministry of Housing, Communities & Local Government
£bn
2023-24
2024-25
2025-26
% Change
Resource Expenditure
3.3
3.8
3.8
7.5
Capital Expenditure
6.8
8.5
8.8
10.7
Total Expenditure
10.1
12.3
12.6
9.7
MHCLG won big increases in its Budget thanks to several new policy areas that now sit within the Department, including investment zones. The department’s resource budget will be £3.8bn next year and its capital budget will be £8.8bn, a 7.5% and 10.7% increase on last year, respectively. This will include £50m of new spending to expedite the planning process, including for NSIPs, with the recruitment and training of 300 graduates and apprentices into local planning authorities and improvement of council planning capacity. This £50m will also “accelerate large sites that are stuck in the planning system”.
The MHCLG settlement confirms funding for investment zones and freeports. Government say they will 'work with partners to ensure the freeports policy model aligns' with the new industrial strategy.
There will be £900m for councils to invest from the UK Shared Prosperity Fund next year before the government brings forward wider funding reforms. The reduced funding is provided to provide stability in advance of reforms. The Long‑Term Plan for Towns will be retained and reformed into a new regeneration programme and unfunded projects will be reviewed. £1bn will be available for core ‘Levelling Up’ projects but is minded to cancel culture and capital projects to “ensure investment is focused on the [government’s] growth mission”. The government will reform the local growth funding landscape at Phase Two of the spending review. They say they will rationalise the number of funds and move away from competitions. Members have told us in the past that the number of grant funds can be confusing and it is often difficult to know which one to apply for with overlapping priorities. We would therefore welcome a rationalisation of the number of funds but we will look more closely at what moving away from competitive grants might mean, and would welcome views.
Department for Environment, Food and Rural Affairs
£bn
2023-24
2024-25
2025-26
% Change
Resource Expenditure
4.7
4.8
4.8
-1.9
Capital Expenditure
2.1
2.3
2.7
12.6
Total Expenditure
6.8
7.1
7.5
2.7
Defra funding will increase in real terms by 2.7%, with an increase in capital spending but decrease in resource spending. £600m in 2024-25 will be spent on flood defences and flood schemes, which will be reviewed next year to ensure they affordable. In total, £2.4 billion will be spent over 2024-25 and 2025-26 on flood resilience.
The Government say that Defra's settlement prioritises climate adaptation, food security, net zero and environmental goals. The Chancellor has pledged "at least £400 million in capital" across 2024-25 and 2025-26 for tree planting and peatland restoration to protect soils, rivers, and biodiversity, and contribute to climate mitigation and resilience.
Home Office
£bn
2023-24
2024-25
2025-26
% Change
Resource Expenditure
19.0
20.8
20.6
-3.2
Capital Expenditure
1.3
1.9
1.5
5.2
Total Expenditure
20.3
22.6
22.1
-2.7
Resource spending will decline 3.2% in real terms to £20.6bn next year compared to 2023-24. Capital spending will rise 5.2% to £1.5bn in the same period. The government say spending includes plans for a new Border Security Command with hundreds of specialist investigators and using counterterrorism powers to tackle organised crime gangs.
Other Spending
The government is proceeding with the Mid South West and Causeway Coast and Glens City and Growth Deals in Northern Ireland, with £162m investment over 15 years. The Argyll and Bute City and Growth Deal will also go ahead with £25m of funding over a decade.
Funding for Investment Zones and Freeports has been approved and the government has confirmed that five new customs sites will be designated in existing Freeports shortly. The government will also work to ensure the Freeports policy model aligns with the national Industrial Strategy, which the government launched a green paper on earlier this month (see BPA Circular 242). Note: Reports late last week that government planned to announced five new freeports turned out to be a government comms mistake...
UK Export Finance will support companies supplying critical minerals to UK exporters in growth-driving sectors such as EV battery production, clean energy, aerospace and defence. This new support targets projects that secure critical minerals from overseas and will boost supply chain resilience in key manufacturing sectors. There will also be £0.75m to establish Brand Scotland, a programme run by the Scotland Office to promote Scottish investment opportunities and exports across the globe.
Policy
UK Carbon Border Adjustment Mechanism (CBAM)
Alongside the Budget the Government has confirmed that a UK 'CBAM' will be introduced on 1 January 2027. It will place a carbon price on goods that are at risk of "carbon leakage" imported to the UK from the aluminium, cement, fertiliser, hydrogen, iron and steel sectors. Carbon leakage refers to when decarbonisation policy results in carbon intensive goods manufacturing moving to other countries, resulting in lost economic output but no net reduction in global emissions. A 'CBAM' aims to ensure that UK decarbonisation efforts lead to a true reduction in global emissions rather than simply displacing carbon emissions overseas.
The government announced that products from the glass and ceramics sectors will not be in scope of the UK CBAM from 2027, as previously proposed, to allow government and industry time to address feasibility concerns raised throughout the consultation process. The government will continue to work with industry to address these concerns before considering their potential inclusion at a later date. Government also said that the value of the minimum registration threshold will be increased from £10,000 to £50,000 so only businesses importing £50,000 or more of CBAM goods over a 12-month period will need to comply with the UK CBAM.
Trade Tariffs
The government will maintain tariff-free imports until June 2026 on goods ranging from aluminium frames used by UK bicycle manufacturers to ingredients used by UK food producers.
Minimum/Living Wage
As announced earlier this week, the minimum wage and national living wage will rise from April next year, above the rate recommended by the Low Pay Commission.
The minimum wage generally applies to workers under the age of 21, whereas the national living wage is the baseline for those 21+. It differs from the ‘Real Living Wage’, which is a voluntary rate set by the Living Wage Foundation
The rates will be as follows:
2024-25
2025-26
Increase
21 and over
£11.44
£12.21
6.7%
18 to 20
£8.60
£10.00
16.3%
Under 18
£6.40
£7.55
18%
Apprentice
£6.40
£7.55
18%
The voluntary ‘real living wage’ for workers outside London is currently £12.60 per hour.
The Growth Mission
There is a useful recap of the Government's emerging plans for its first 'mission', to 'kickstart economic growth' in section three of the Budget document. The government's growth plan has three overarching themes: stability, investment, and reform. Underneath those they have set out seven pillars, illustrated below. The document summarises action taken and planned under each of these pillars. We are of course following this closely and engage with the lead departments where there is a ports interest.
We would welcome your feedback on any of the points mentioned above.
