Budget 2025

The Chancellor promises to “take the fair and necessary decisions” in today’s Budget as she aims to boost the economy while keeping public finances under control. Rachel Reeves said she would not “return Britain to austerity” – and pledged to “take action to help families with the cost of living”. She said she would “drive the biggest growth spurt in a generation” and promised investment in infrastructure, housing, security, defence, education and skills.

Tax Rises

But after a downgrade to the productivity growth forecast – coupled with the U-turn on the fuel allowance and winter benefit cuts, as well as "increased global uncertainty" – the Chancellor is expected to announce a series of tax rises to try to plug an estimated £30bn black hole in the public finances. It is expected that there will be a tax increase measure, an extension of the freeze on income tax limits for a further two years beyond 2028, which is expected to raise around £8 billion.

Key Tax Measures

Measures already confirmed by the government include:

• Allow Municipalities to charge tourists a tax to stay in their areas
• Expansion of the Sugar tax on packaged milkshakes and latte macchiato
• Imposing additional taxes on higher value properties
  It is reported that the Chancellor will also cap the allowance for wage sacrifice schemes, increase taxes on gambling companies and introduce a pay-per-mile system for electric vehicles.

Spending Announcements

As well as filling the black hole in public finances, these measures could also allow the Chancellor to spend money on a key demand from Labor MPs – the partial or full removal of the two-child benefit cap, which she says will have an immediate impact on reducing child poverty. According to reports, benefits are generally increased in line with inflation, at a cost of £6 billion.

Key Spending Measures

The government has already confirmed several key announcements including:

• Excessive inflation increase in state pension by £550 per year for 13 million eligible pensioners
• A freeze on prescription prices and Rail fares
• £5 million to renew libraries in secondary schools
  It will also announce additional funding for the NHS to cut waiting lists, including the expansion of the Neighborhood Health Service across the country to bring together GP, nurse, dental and pharmacy services – as well as £300m of investment in modernizing technology in the health service.

National Living Wage

And although the costs of this will be borne by companies, the Chancellor will confirm a 4.1% increase in the national living wage – an increase to £12.71 per hour for eligible workers aged 21 and over. For a full-time employee over the age of 21, this means a pay rise of £900 per year.

Opposition Reaction

However, the Tories have criticized the chancellor over the impending tax rises, with shadow chancellor Sir Mel Stride saying in a statement: "Having already increased taxes by £40 billion, Reeves said she had come clean, she would not come back and now it is up to her. A year later she will break that promise." He described her decisions as "political weakness" – she opted for "higher social benefits and higher taxes" and "hard-working families are left with the bill".