Chancellor Rachel Reeves has delivered her second budget statement amid Britain's febrile economic mood, but the 2025 fiscal plan appears to have inflamed rather than calmed the political atmosphere.
A Budget of Many Taxes
The Chancellor's statement will likely be remembered for the numerous taxes it raised, rather than the significant one – income tax – that it ultimately spared. Despite arriving at the Treasury last year promising competence, stability and economic growth, Reeves has so far delivered none of these key objectives according to political observers.
Even before Wednesday's budget announcement, the Chancellor's position was balanced on a knife-edge. The situation remains unchanged following her speech to Parliament, which contained significant fiscal changes, altered spending commitments and adjusted economic forecasts.
Economic Forecasts Worsen
In a particularly embarrassing prelude to the budget, the Office for Budget Responsibility accidentally released its forecasts ahead of schedule, revealing reduced growth and productivity predictions that the Chancellor defiantly promised to reverse.
The OBR's revised forecasts indicate that from 2026, GDP growth will be less than previously predicted, creating additional headwinds for the government's economic strategy. This comes at a time when the Chancellor acknowledged public frustration and anger in her pre-budget video message.
Political Vulnerability for Labour
Political analysts suggest that the same public discontent that carried Labour into government now threatens to sweep them out again. The 2025 budget appears unlikely to calm these feelings, with some aspects potentially making the situation worse.
Higher taxes on private pension contributions may have unintended economic consequences, potentially deterring savings while boosting consumer spending in ways that could significantly impact the economy.
The budget contained some measures welcomed by Labour backbenchers, particularly the removal of the two-child benefit cap. However, this has created tension with Reeves' previous commitments to fiscal prudence.
Observers note that the budget seemed designed more to calm a fractious Labour party than to appeal to swing voters in marginal constituencies. With difficult elections looming next May, fearful Labour MPs and candidates remain particularly concerned about the political fallout.
Broader Budget Process Concerns
The budget process itself has come under scrutiny following the OBR's premature release of forecasts. Critics argue that the long run-up to a very late budget resulted in compromised decision-making, while the strategy of pre-budget leaking has spun out of control.
This approach has been described as disreputable, insulting to Parliament, and weakening the Chancellor's authority. The 2025 budget experience serves as an object lesson in how not to conduct fiscal planning, with calls for comprehensive reform of the entire preparation process.
While many of these issues predate Reeves' chancellorship, they remain her responsibility. Her original commitment not to raise three key personal taxes during this parliament has created mixed messages throughout the extended pre-budget period.
By her own modest standards, Reeves delivered a decent performative political speech with some jokes and sharp exchanges with the opposition. However, she doesn't command the Commons with the authority that more powerful chancellors have demonstrated, limiting her ability to implement difficult measures.
As former Chancellor Nigel Lawson observed, budget day represents one of the few occasions when the entire nation focuses on the economy simultaneously. For Rachel Reeves, this concentrated attention during volatile political times is unlikely to bring good news.
