How is the UK economy looking?published at 09:03 Greenwich Mean Time 30 October

09:03 GMT 30 October

Dharshini David
Chief economics correspondent

The warnings of a painful Budget may have dominated but the good news is the economy is in better shape than expected in the spring.

The first half of this year saw an emphatic bounce back from 2023's short-lived recession, making the UK a top performer amongst major economies. For those reasons the independent forecasters, the Office for Budget Responsibility, will upgrade their predictions for growth this year. And with the spike in inflation behind us, the next interest rate cut is expected next week.

But that’s not to say it’s plain sailing ahead. That recovery has lost momentum as we enter the second half of this year, as businesses and households continue to grapple with higher costs, and some of the latter are exposed to a jump in interest repayments as they re-fix mortgages.

So while the Chancellor may be able to unveil a solid set of growth forecasts, they will be far from sparkling, a fraction of the growth UK enjoyed on average prior to 2008's financial crisis, meaning we're each thousands worse off than we could have been.

Rachel Reeves plans to reboot public investment to boost growth. However, such projects take time to deliver - and the results can be uncertain.

The Treasury has shared some photos of Chancellor Reeves preparing for the budget over the last week:

Image source, HM Treasury

Image source, HM Treasury

Image source, HM Treasury

This Budget will set the political landscape for years to comepublished at 08:49 Greenwich Mean Time 30 October

08:49 GMT 30 October

Chris Mason
Political editor

This will be a big Budget. Big tax rises, big borrowing, big spending.

And big politically – because it will set the political landscape for the years to come.

Expect a lot of talk from Rachel Reeves about what she will call "choices".

Her team see it as a "once in a generation" Budget, where its scale, it is claimed, matches the scale of the challenge they face.

Which is code for the country's in a mess and they think it's going to cost a lot to fix it.

The extent to which it is - and whether billions of pounds more of taxpayers' money are the solution - are the open questions.

• Read Chris Mason's full analysis ahead of the Budget here.

The chancellor has confirmed ahead of today's Budget that minimum wages will rise in April, with hourly rates for over-21s set to go up to £12.21 an hour.

Rachel Reeves said the pay boost marked a "significant step" towards achieving Labour’s promise of a "genuine living wage" for workers. It means:

• The minimum wage for over 21s, known officially as the National Living Wage, will rise by 6.7%, from £11.44 to £12.21 from April 2025. This year, it increased to £11.44 an hour, from £10.42
• For 18 to 20-year-olds, the minimum wage will rise from £8.60 to £10. In April this year, the rate was increased from £7.49
• Apprentices will get the biggest pay bump, from £6.40 to £7.55 an hour. Prior to this year, it was £5.28

The Treasury said a big hike in the minimum wage for under-21s - the largest on record - marked the first step towards a single rate for all adults.

A cafe owner in Pudsey, Leeds, says the increased cap on single bus fares - from £2 to £3 - will hit her customers hard. Her cafe, Scrumdiddlyumptious, sits opposite the bus station.

Adele Duncan tells the BBC: "That's extra money they have to find and it means they will have less to spend in here.

"I've run the business for a couple of years and it's been really hard and I'm worried it's going to get even harder," she adds.

Adele says she wants to see Chancellor Rachel Reeves extend business rates relief, which is due to end at the end of March next year.

She tells the BBC she sometimes ends up working 13 hour days, five days a week, as she can't afford to employ anyone else - especially as the minimum wage is increasing.

A beauty salon owner in Chelmsford says the planned rise in minimum wage - which will increase the wage of apprentices - will leave hairdressers suffering.

"Being in the hair and beauty industry, I know hairdressers are going to suffer significantly with their apprentice rises. There is big need for apprentices but it’s also unskilled labour," Chloe Ahmed tells BBC Radio 5 Live.

"I’ve got one apprentice. So yes it will have an effect but that effect is manageable. When you have 10 apprentices, that’s a difference kettle of fish," she says.

She says despite rising costs, there's a limit to how much her salon can raise its prices. Chloe would like to see a hike in the threshold at which businesses pay VAT - but says she's "certain" this won't happen in the next five years.

One of the measures we've already heard is coming in the Budget is an increase in the single bus fare cap, applied to many routes in England, from £2 to £3.

But in Manchester, where the buses are operated under a newly-introduced locally-controlled system, a £2 cap will remain in place.

Mayor of Greater Manchester Andy Burnham tells BBC Breakfast that buses outside of areas like London and Manchester are "deregulated" and it's "quite expensive to subsidise fares in that system".

He argues that when buses are under public control the money they raise does not go to private operators' profits but instead can be used to subsidise fares.

Asked what he would like to see from the Budget, he says he wants to see new rail infrastructure for the north of England and that there is a need to "get serious about the housing crisis and start building council homes right across the country".

At the election, Labour promised not to increase taxes on "working people" and said it would not raise VAT, income tax or National Insurance (NI).

But after warning about "difficult decisions" to be made about the country’s finances, here are some other changes the Budget could set out:

• Capital gains tax: There has been speculation that these rates could be increased but the prime minister appeared to dismiss suggestions of a rise to as much as 39%
• Inheritance tax: It is thought changes to a number of exemptions which affect how much inheritance tax people have to pay are being considered
• Fuel duty: Fuel duty was frozen between 2012 and 2022, and cut by 5p in March 2022 when pump prices surged following Russia's invasion of Ukraine. Some motoring groups argue the cut was never passed on to motorists and the RAC says it could be reversed

• Non-dom tax status: Labour has said it wants to toughen the existing plans, although these plans might be reconsidered amid worries they could bring in less money than expected
• National Insurance contributions by employers: At the moment companies do not pay NI on pension contributions they make for staff, but reports have suggested this could change

Read more about what might be in the Budget here.

Dharshini David
Chief economics correspondent

Image source, Getty Images

The government typically spends more than its income, the difference funded by borrowing on financial markets via bonds. The interest rate on those, bond yields, is influenced by perceptions of the government’s creditworthiness, the riskiness of its plans.

The big giveaway in Liz Truss’ government’s mini-Budget in 2022 saw those rates soar, reflecting concerns about the size of the tax cuts, and what that meant for the amount the government had to borrow - plus a lack of oversight from the official independent forecasting body. That triggered a temporary spike in the related cost of new fixed rate mortgages.

Most governments set themselves rules, to try to keep those rates down by demonstrating responsibility.

Rachel Reeves will confirm two new rules. Like Jeremy Hunt, she wants the public debt built up over time relative to income to be falling in five years time. But by tweaking the definition of debt, she intends to borrow billions more. However, she hopes that won’t lead to a surge in borrowing costs by not taking up the full amount of borrowing space on offer. And crucially such borrowing is only for investment projects like roads, which aim to boost growth.

For her second rule will be that day-to-day public services will have to be funded through income such as tax in five years time.

For a chancellor, credibility has a price tag attached.

A couple of big ticket changes which would usually come out in the annual Budget statement have already been announced - shortly after Labour came to power in the summer:

• Minimum wage: The National Living Wage paid to over-21s will go up by 6.7% in April 2025, while the National Minimum Wage for 18 to 20-year-olds will see a 16% increase
• Bus fare cap: The single bus fare cap applied to many routes in England will be raised to £3. It is an increase on the current limit of £2
• Winter fuel payments: The government has said future payments will only be made to those getting pension credit or other means-tested help
• State pension: The state pension is expected to rise by 4.1% in April 2025
• VAT on private schools: The government has said VAT will be added to private school fees from 1 January. Some private schools will lose business rates relief.
• Energy windfall tax: The energy profits levy is due to rise to 38% from 35% on 1 November, external, external, and will remain in place until 31 March 2030.

Find out more here.

The Budget speech usually starts at about 12:30 UK time and lasts around an hour. It will be broadcast live on the BBC iPlayer and on the BBC News website.

The current leader of the opposition, Conservative Party leader Rishi Sunak, will give a speech responding to the Budget as soon as Reeves sits down.

We'll bring you live updates and analysis here throughout.

Interim director of policy at Citizens Advice Tom MacInnes says the Budget is a "great opportunity" for the chancellor to help out "some of the people who have been particularly badly hit over the last couple of years”.

Speaking to BBC Radio 4's Today programme, he says the charity wants to see more help for private renters on low incomes and the disabled, as well as targeted support for those expected to struggle with the cost of energy this winter.

He says Citizens Advice would also welcome reforms to universal credit to reduce deductions – money taken from benefit payments to repay loans and debts – arguing there is a "design flaw" in the system seeing people pay back money at "really high rates".

Image source, EPA-EFE/REX/Shutterstock

The director of the UK hospitality industry group says increased costs in the hospitality sector could see businesses going under.

Fiona Eastwood, who is also chief operating officer at events giant Merlin Entertainment, says the government's "doom and gloom messaging" has impacted consumer confidence - and consequently how much they're willing to spend.

The rumoured measures - which will be confirmed by Chancellor Rachel Reeves today - could add a total of £1.9bn to the hospitality wage bill, she says.

"In a survey done this month, 29% of industry members reduced profit this year, 12% broke even and 18% were operating a loss.

"So with these increased costs you could see 30% of those businesses going under," she tells BBC Radio 4's Today programme.

Labour has repeatedly said that it needs to make difficult financial decisions.

When the party took power in July, Reeves said it had "inherited the worst set of circumstances since the Second World War" - something the Conservatives deny.

Reeves is now looking to make tax rises and spending cuts to the value of £40bn, according to government sources. She has repeatedly said there will be "no return to austerity", suggesting most of that gap will need to be filled with tax rises rather than spending cuts.

She will not be borrowing more to fill that gap, as she is setting herself a rule that all day-to-day spending should be funded from taxes raised.

However, investment is governed by a different rule, and the chancellor is switching to a different definition for government debt to allow the government to borrow more to fund new big projects.

The new rules would give her more room to borrow, up to £50bn more, to invest in building projects such as roads, railways and hospitals. She is not expected to borrow the full £50bn.

Image source, EPA

Last month, Labour held its party conference - a multi-day event in which its policies are decided with speeches, debates and networking.

Looking ahead to her first Budget, Reeves’s spoke of "no return to austerity" when she address delegates. She said it would be a Budget for economic growth and investment, stability and a new industrial strategy to spread wealth across Britain.

"Yes, we must deal with the Tory legacy and that means tough decisions, but I won't let that dim our ambition for Britain," she told the conference.

"So, it will be a Budget with real ambition, a Budget to fix the foundations, a Budget to deliver the change that we promised, a Budget to rebuild Britain."

Douglas Fraser
Scotland business & economy editor

Most of today’s predicated tax rises will affect Scots, though for income tax, only the starting threshold applies north of the border.

Property transactions tax is also devolved.

Some of Rachel Reeves’ spending decisions only affect Scots indirectly, as Holyrood MSPs get to decide how funds are allocated.

There will be a Budget statement from Scottish finance secretary Shona Robison on 4 December and to get that through the Scottish Parliament, she'll need the support of an opposition party.

For more details on now today’s statement could affect Scotland, you can read my article.

Image source, UK Parliament

Chancellor Rachel Reeves will deliver the Budget speech in the House of Commons in Westminster.

It will start at around 12:30 GMT, just after Prime Minister’s Questions, and should last about an hour. It will be broadcast live on the BBC iPlayer and on the BBC News website. You can tune in here by clicking Watch Live at the top of the page.

Rishi Sunak, the leader of the opposition, will respond to the Budget as soon as Reeves sits down. It will be one of his last set-piece events as Conservative Party leader after he announced his plans to stand down after losing the general election. His successor will be revealed on 2 November after a leadership election.

MPs will then debate the Budget. This can go for several days, before the government introduces a Finance Bill to turn the proposals into law.

Dharshini David
Chief economics correspondent

Regardless of who is in the frame, the Budget is set to confirm that the nation’s tax bill is set to rise by billions.

Under previous Conservative plans, the tax burden - the proportion of the UK’s income going to the tax office - was due to reach 37.1% which is the highest since the Second World War. Now it could top 38% by 2030, a new record.

That would leave the UK in the middle of the international pack, with a greater burden than the US and Japan but less than the average in the Eurozone.

But the burden is rising particularly fast here because the chancellor wants all spending on public services in five years time to be matched by income. But even tax rises of £30bn may just let the budgets for areas such as law and order and housing keep pace with inflation.

Because health, welfare and interest payments on public debt have taken increasing shares of government spending as we get older, sicker and have borrowed more.

So while the state is getting bigger, it may not deliver the improved services you might expect.

Image source, Reuters

There has been plenty of speculation in recent weeks over exactly what Labour plans to do with the Budget.

Some changes have already been shared publicly, however - here they are at a glance:

Winter fuel payments: The government has said future payments will only be made to those getting pension credit or other means-tested help. The plans have been criticised by some MPs, unions and charities.

State pension: The state pension is set to rise by 4.1% in April 2025. The increase will be confirmed around the time of the Budget.

VAT on private schools: The government has said VAT will be added to private school fees from 1 January. Some private schools will lose business rates relief.

Energy windfall tax: The government is increasing the windfall tax on the profits oil and gas firms make in the UK. The energy profits levy is due to rise to 38% from 35% on 1 November and will remain in place until 31 March 2030.

Bus fare cap: The single bus fare cap applied to many routes in England will be raised to £3. It is an increase on the current limit of £2, which was introduced under the previous Conservative government and was due to expire in December.

Minimum wage: Minimum wages will rise in April, with hourly rates for over-21s set to go up to £12.21 an hour. Employees aged 18 to 20 and apprentices will also see their minimum hourly pay increase.

Even though the Budget statement happens annually, we have already had one this year.

This was delivered by the previous Conservative Chancellor, Jeremy Hunt, in March 2024, before the general election.

But because Labour won in July the now-chancellor, Rachel Reeves, can set out her own Budget that focuses on the new government's financial priorities.

The parties set out their priorities at election time in their manifestos - a series of promises and pledges that spell out what they plan to do if they win power. That means this Budget will be closely watched for how the financial measures in that document translate into the realities of being in government.