Chancellor Rachel Reeves' first Budget, delivered against a backdrop of stark economic warnings, has unveiled a £30 billion tax rise package with significant consequences for both the wealthy and families in poverty.
While the run-up to the announcement was politically damaging and filled with dire forecasts, the final measures contained several key policies aimed at reshaping the UK's fiscal landscape and supporting those most in need.
The 'Unstealthy' £67 Billion Tax Grab
The single largest revenue-raising measure is an extension of the personal tax threshold freeze, a policy inherited from the previous government. While often labelled a 'stealth tax', its latest extension means it will run for nine consecutive years.
By the end of the decade, this freeze is projected to raise a colossal £67 billion, a sum the Resolution Foundation's chief executive, Ruth Curtice, describes as distinctly 'unstealthy'. The direct impact on a typical worker earning £35,000 a year will be a loss of £1,400.
The rest of the Budget was filled with smaller, targeted tax increases aimed at wealthier households. As Curtice argues, "If you're wealthy enough to earn income from dividends or rented out properties, live in a mansion, or put loads of your pay packet into a tax-advantaged pension pot you can definitely afford to pay a bit more."
Lifting Children Out of Poverty
Arguably the most socially significant measure in the Budget was the scrapping of the two-child limit on welfare support. This controversial policy has been a focal point for anti-poverty campaigners for years.
The abolition of this limit is set to have a profound effect, with analysis suggesting it will lift around half a million children out of poverty. This move represents a major shift in social security policy and provides the most substantial support for the cost of living within the Budget.
A Backloaded Budget with a Political Catch
However, the Budget comes with a significant catch: its implementation is heavily backloaded. The popular cost-of-living support, including the benefit change, is scheduled for April next year.
In contrast, many of the income-sapping tax rises and potential cuts to public services are not due to take effect until April 2028. This timing is politically significant, as it coincides with the expected date of the next General Election, leading to questions about the feasibility of this tax and spending timetable.
Despite better-than-expected economic forecasts for the Treasury, the outlook for household living standards remains bleak. The Resolution Foundation notes that the projection for living standards over this Parliament is the second worst since records began in the 1950s. The last time the outlook was this dire, outside of a pandemic, was in 1966.
