Britain’s chancellor of the exchequer Rachel Reeves has once again resorted to large tax increases to fund the Labour government’s spending plans, after previously promising a year ago that a tax raid then was a “one-off”.
Ms Reeves announced more than £26.1 billion (€29.8 billion) of tax increases, affecting property owners, savers, workers and gamblers, in her second autumn budget delivered to a raucous House of Commons on Wednesday.
Added to the £40 billion in tax hikes in her first budget a year ago, it amounts to one of the biggest tax increases in the history of any UK government. This year, however, Ms Reeves avoided hitting employers with tax increases, after criticism last year.
Markets appeared to react calmly to Ms Reeves’s announcements. However, her budget delivery on Wednesday was initially shrouded in chaos, after most of the details were accidentally published online an hour ahead of her speech by the Office for Budget Responsibility (OBR), the UK’s independent fiscal watchdog.
Tory leader Kemi Badenoch said the leak was a “shambles” while Ms Reeves told the Commons she was “deeply disappointed”. Her spokesman told Westminster journalists straight after the budget that she still had confidence in OBR chief Richard Hughes.
The OBR took responsibility for the leak and apologised, while Mr Hughes indicated later on Wednesday that he would resign if asked following an investigation.
The budget, delivered against a backdrop of anaemic UK economic growth and soaring public debt levels, had been billed as “make or break” politically for Ms Reeves and the unpopular Labour government led by prime minister Keir Starmer.
The opposition Tory benches were in uproarious mood as she rose to her feet to deliver the budget as news filtered through that the OBR had prematurely published its analysis online. Tory MPs shouted at Ms Reeves to “resign” as she spoke.
If Irish households are so rich, why does it feel like an illusion?
“I’m happy for them to shout as much as they like,” the chancellor said at one stage during her speech. “As long as they do it from the opposition benches where they cannot do any more damage to the country.”
Almost all of the measures had been well-flagged to British media in a series of briefings and leaks by people close to the Labour government.
The flagship move, from the point of view of Labour backbenchers, was the abolition of the two-child benefits cap that limits payouts to larger families. To the cheers of her colleagues standing behind her, she announced she was scrapping the cap at a cost of £2.3 billion next year.
Other key measures announced by Ms Reeves included a three-year freeze on income tax thresholds that will drag more taxpayers into higher bands, raising up to £8.3 billion; a tax raid on pension contributions that will raise £4.7 billion annually by the end of the decade; a by-the-mile levy on the driving of electric cars; and higher taxes from 2028 on homes worth £2 million and higher, dubbed a “mansion tax” in British media.
Ms Reeves highlighted that the OBR had upgraded its forecast on growth for the current year from 1 per cent of GDP to 1.5 per cent, as a result of her measures. However, the OBR also said that growth would flatline at that level in the years ahead.
The chancellor also announced an extra £370 million in funding for the Northern Ireland Executive.
“These are Labour choices,” Ms Reeves said repeatedly throughout her budget speech. “I have kept every single one of our manifesto promises.”
(c) Copyright Thomson Reuters 2025
