Rachel Reeves says the UK voted for change, and the Labour government has a mandate for a decade of “national renewal”.

Reeves pledges “more pounds in people’s pockets” and improved living standards. The only way to drive economic growth is to “invest, invest, invest”, she says.

The government must “restore economic stability and turn the page on 14 years” of Conservative government, Reeves says. The Labour party has rebuilt the UK economy before, and will “rebuild Britain once again”.

Reeves says this budget will raise taxes by £40bn.

She adds that she is “deeply proud to be Britain’s first ever female chancellor of the exchequer’.

Peter Walker, senior political correspondent: Reeves sets out the political challenge – and the very big one – at the centre of her budget, and indeed the whole government: making people feel they are better off, and with better public services. And this requires investment, she says, adding some inevitable Tory-bashing for good measure, plus noting her status as the first-ever female chancellor.

National insurance

• Employees will not pay more directly, Reeves says, but she will raise employers’ national insurance contributions by 1.2 percentage points to 15% from April.

• The government will also reduce a secondary threshold when contributions are due from £9,100 to £5,000.

• Those measures will raise £25bn a year by the end of the forecast period.

• Before the budget, employers were liable for a rate of 13.8% of workers’ earnings above £175 a week. An increase of one percentage point would raise an estimated £8.5bn.

PW: This is the big fiscal hitter of the budget – £25bn a year by the end of the parliament – and probably the most politically perilous choice Reeves will make. There is no doubt that public services need the extra money, and voters want better public services. But it will be portrayed as tax on jobs, and as something that could hit growth, even with the new allowances for smaller businesses.

Income tax

PW: If not a fully fledged rabbit yanked from a hat, then we do perhaps have a glimpse of a nose and some whiskers. The surprise move allows Reeves to argue she has kept Labour’s manifesto promise to not increase taxes on working people – even if it does only start in 2028/29.

Capital gains and inheritance tax

• Capital gains tax will be increased. The lower rate will be raised from 10% to 18%, while the higher rate will rise from 20% to 24%. However, there will be no increase on the 24% capital gains rate imposed on second properties.

• The government will extend a freeze on the threshold for inheritance tax, allowing £325,000 to be inherited tax free.

• There will be tax raises worth £2bn from reforming reliefs for business and agricultural assets. After £1m, those assets will attract inheritance tax of 20%.

PW: A rise in capital gains tax was very much baked in with budget expectations, and the increases are not huge – as Reeves says, they will keep UK rates relatively low by international standards. And it will raise a relatively modest £2.5bn by the end of the parliament. On inheritance tax, she has largely closed loopholes connected to farms, but even this and other tweaks will raise an eventual £2bn a year. None of this is likely to be hugely contentious.

The minimum wage

• Reeves confirms that the “national living wage”, the legal minimum for over-21s, will increase by 6.7% to £12.21, equivalent to £1,400 a year for an eligible full-time worker.

• There will be a single adult rate phased in over time to eventually equalise pay for under-21s.

PW: The most recent of dozens of announcements to be briefed in advance of the budget. Paying people more is usually seen as a vote-winner – but ministers will also be wary of business voices warning about the impact this could have on job creation.

Tobacco and alcohol

• The government will implement a levy on vapes, which will be increased in line with tobacco.

• Tobacco taxes will rise by 2% above retail prices index (RPI) measure of inflation for the rest of this parliament, and tax on hand-rolling tobacco will increase by 10%.

• Taxes on alcohol will rise in line with the RPI. However, Reeves announces a cut in draught duty by 1.7%, which she says is a penny off a pint in the pub.

PW: On what we are obliged to call sin taxes, Reeves has, as expected, further taxed tobacco and vapes. In another sign of how this government is less worried about what might be termed nanny state measures, it is also toughening the levy on sugary soft drinks. As a sop to the tabloids, she did cut 1p off the duty of a pint of draught beer.

Fuel duty

• Reeves says increasing fuel duty next year would be the “wrong choice”, so she extends the freeze for a year and maintains the last government’s 5p cut.

• Fuel duty was frozen between 2011 and 2022, and cut by 5p in March 2022 after Russia’s full-scale invasion of Ukraine.

PW: A continued freeze to fuel duty was one of the most politically tricky decisions faced by Reeves. On the one hand, as she said, the £3bn cost is a lot. But the anti-fuel duty rise lobby is very powerful, and increasing it could (and would) be portrayed as a tax rise for working people.

Private school fees

PW: Not in the least a surprise, and if you believe the polling, one of the more popular policies in both the Labour manifesto and in this budget. Will it see a rush of private school students into the state sector? Time will tell, but ministers are fairly relaxed.

Schools and education

• Reeves says the Department for Education will receive £6.7bn, a 19% real-terms increase. That includes £1.4bn to rebuild schools in the greatest need.

• The schools budget will increase by £2.3bn to support the hiring of teachers.

• There will be £2.1bn for school maintenance, a £300m increase.

• Reeves announces a £1bn uplift in funding for special needs.

• There will be another £300m for higher education.

PW: One of the most visible and enduring legacies of the last Labour government was the many new and renovated schools it delivered. Reeves has set out her ambition to copy this – the 19% real-terms increase in investment is an instant lesson on what you can do with the changed fiscal rules.

NHS

• Reeves promises a 10-year plan for the NHS in the spring, targeting 2% productivity growth next year.

• She announces a £22.6bn increase in the day-to-day health budget, and £3.1bn increase in the capital budget. That includes £1bn for repairs and upgrades and £1.5bn for new beds in hospitals and testing capacity.

PW: At risk of endlessly repeating a theme, the state of the NHS is one of the biggest factors on which Labour won the election, and on which it will be judged five years later. Will a £22.6bn increase in everyday spending be enough? Not without parallel structural changes. But it’s fair to say that without it, waiting lists would surely rise again. And the voters would notice.

Housing

• The government will spend £5bn on housing, including increasing the supply of affordable housing.

• The government will reduce right-to-buy discounts, and local governments will retain the earnings from council housing sales to allow them to reinvest.

• The government will hire “hundreds of new planning officers” to accelerate housebuilding.

PW: All the figures and new policies on housing were briefed in advance, and for good political reason. One of the key metrics the Starmer government has set itself is to build 1.5m new homes – and the voters are watching.

Transport

• Reeves commits to the Transpennine Route Upgrade, improving capacity at Manchester Victoria, and electrifying the Wigan to Bolton route. She also promises to support east-west rail link between Oxford and Cambridge.

• Reeves confirms the government will fund tunnelling of HS2 to London Euston.

• There will be a £500m increase in the roads budget next year to target potholes.

PW: No, it’s not full HS2, but the ragbag of mainly northern rail routes, and confirmation that the Manchester-London route will end in Euston are something. And as every councillor will tell you, at length, voters are very, very interested in potholes.

Energy

• Reeves announces £3.4bn for the warm homes plan to upgrade buildings, lowering energy bills.

• The government will fund Great British Energy, a new body to be based in Aberdeen.

Public spending

Defence

Local government

• There will be £1.3bn for additional grant funding for local government, including £600m for social care.

• Greater Manchester and the West Midlands will get integrated settlements next year, allowing them to take more control of their spending.

PW: This is something for a part of public life which bore the brunt of austerity, and the section often most keenly felt by voters. Is it enough? Of course not. But is it a start? Yes.

Public investment

• Reeves says more public investment is needed in the UK. A new rule will target debt falling as a share of the economy. She confirms that debt will be measured as public sector net financial liabilities, recognising benefits from investments.

• The rule will apply in 2029-30, and then net financial debt will fall by the third year of every forecast.

• There will be regular reports on government investments from the OBR.

• She says the government will invest £1bn in aerospace, £2bn in automotive to support electric vehicles, and £500m for life sciences.

• Reeves adds the government will invest £6.1bn in funding in sectors such as engineering, biotechnology and medical science.

PW: Politically, albeit most likely in the longer term, this could be the most significant change in the budget. To very obviously make the link between low investment and the state of public services, Reeves lists the problems of crumbling infrastructure in various sectors to a series of cries of “Shame!” from Labour MPs.

Planes and private jets

• Air passenger duty will increase by up to £2 for each economy short-haul flight, Reeves says.

• Private jets will attract an extra 50% air passenger duty, up to £450 per passenger for a flight.

PW: This is both a largely politically-risk free change, and one which allowed the chancellor to make a few well-aimed jokes in the direction of Rishi Sunak, saying the levy would be applied on flights going to “say … California?”. It wins plenty of laughs.

Business taxes and non-doms

• The government will introduce permanently lower business rates for retail, hospitality and leisure businesses from 2026-27. Until then they will receive 40% relief on business rates up to a cap of £110,000.

• Employment allowance will be increased from £5000 to £10,500, reducing national insurance for smaller businesses.

• Taxes on carried interest, generally paid by private equity managers, will rise from 28% to 32% from April.

• Reeves confirms the oil profits levy will be increased to 38%, and extended.

• The concept of non-domicile residents will be abolished from April.

Compensation schemes

PW: Even Tory MPs will find it hard to argue with this. And Reeves’s words that the last government apologised for the infected blood scandal but failed to budget at all for compensation payments is a powerful argument.

Other measures

OBR

• Reeves says Labour inherited a £22bn “black hole” with allegedly unfunded pledges by the Conservative government.

• The Office for Budget Responsibility (OBR), the government’s budget watchdog, has published a review saying that the previous government did not disclose details of spending. Those details would have made forecasts “materially different”, Reeves says.

• Reeves says the government will implement 10 recommendations from the OBR’s review.

PW: This is very nakedly partisan and in some ways familiar, not least the idea of the £22bn fiscal black hole. But the idea of the OBR saying it was effectively misled by the Conservatives is very strong political cover for the coming tax rises in limited increases to public budgets. It will enrage Jeremy Hunt, the shadow chancellor, all the more.

Inflation and growth forecasts

• The chancellor will maintain the Bank of England’s 2% target for inflation.

• Inflation will average 2.5% in 2024, rising to 2.6% in 2025, before gradually dropping to 2% in 2029, according to OBR forecasts. Inflation was at 1.7% in September, below the Bank of England’s 2% target, and down from 11% in October 2022.

• The OBR slightly upgrades its growth forecast for this year, but adjusts them down in later years. GDP growth is forecast to be 1.1% in 2024, then 2%, 1.8%, 1.5%, 1.5%, and 1.6% in 2030, Reeves says. At the spring budget under the then Conservative chancellor Jeremy Hunt the OBR had forecast 0.8% growth this year, 1.9% in 2025, and 2% in 2026.

PW: The OBR’s inflation and growth predictions are hardly stellar, with inflation not due to fall down to the 2% target before 2029. But in truth, as long as it stays in the 2% range, Reeves would take it. She will, however, very much hope that the growth figures – the stated central task of the Keir Starmer government – pick up.

Government borrowing

• Reeves announces new rules to not borrow for day-to-day spending. The current budget will be balanced within three years of forecasts.

• The government will run a deficit of £26.2bn in 2026, but will achieve a surplus of £10.9bn in 2027-28, £9.3bn in 2028-29 and £9.9bn in 2029-30.

• Public sector net debt will fall from £127bn in 2024-25, falling gradually to £70.6bn by 2029-20.

PW: Expect the forecasts of reduced borrowing and an eventual surplus to be much mentioned by ministers in the coming days and weeks, as they try to push back against the Conservatives’ charges of fiscal incompetence. The tougher rules on day-to-day spending will be seen as a balance to the relaxation of their equivalent on investment, as already announced.

• Reeves says it is a moment of “fundamental choice” for the UK.

• She says the government will protect the NHS, protect working people and “rebuild Britain”.

• She says the Conservatives must say what choices they would make if they disagree with her decisions. They would have to cut schools and hospitals if they disagree with any tax increases.

PW: Reeves’s final words are an open challenge to the Conservatives – and an attempt to pre-empt their accusations of broken promises: ‘what would you do instead?” It is a fair question, even if as an opposition you sometimes get a free pass on such scrutiny.