Chancellor Rachel Reeves is set for a day of intense scrutiny after presenting a Budget that imposed £26 billion in tax rises, a plan immediately overshadowed by a major pre-announcement leak from the government's own economic forecaster.
A Budget of Tax Rises and Fiscal Repair
The Chancellor's decisions have placed Britain on track for a record tax burden. This move became necessary after weaker-than-expected economic forecasts exposed significant holes in her previous government spending plans. The tax increases are also intended to fund a major expansion of welfare spending, most notably the abolition of the two-child benefit cap, a measure projected to lift 450,000 children out of poverty.
Having stepped back from a large-scale income tax rise, Ms Reeves instead opted for a series of smaller, targeted tax hikes. These were designed to cover government expenditure and build a larger financial buffer to comply with her own borrowing rules. The new revenue streams include a pay-per-mile tax for electric vehicles, increased duties on online betting, and a so-called 'mansion tax' applied to properties valued at over £2 million.
Broken Pledges and Economic Fallout
Despite these measures, the Chancellor faced immediate accusations of breaking Labour's core election promise not to raise taxes on 'working people'. This criticism stemmed from her decision to keep income tax thresholds frozen until 2030/31 and to extend national insurance contributions to some pension pots.
Ms Reeves defended her position at a press conference, stating the manifesto was "very clear" it was the rates of income tax, national insurance, and VAT that would not rise. However, she conceded, "I'm not going to get into semantics. I recognise that we are asking people to contribute more by freezing those allowances."
Economists were quick to highlight the consequences. The Resolution Foundation warned of a direct hit to living standards, pointing out that threshold freezes had led the Office for Budget Responsibility (OBR) to downgrade its forecasts for real household disposable income. Experts further cautioned that taxing pension contributions would reduce workers' take-home pay and potentially discourage retirement saving.
Ruth Curtice, chief executive of the Resolution Foundation, described the Budget as "front-footed – and front-loaded" on cost of living support but argued that sticking to the "manifesto tax pledge has cost millions of low-to-middle earners". She noted that while over half a million larger families would see a major income boost and typical energy bills would fall, the Chancellor's fiscal repair job had been "put on hold for three years".
Unprecedented Leak Overshadows Policy
The entire Budget announcement was upstaged by an unprecedented blunder. The OBR published its full assessment of the economy and the Chancellor's plans online before Ms Reeves had even begun her speech in the House of Commons.
The OBR issued an apology, attributing the error to a "technical fault". Its chairman, Richard Hughes, announced an internal investigation to "get to the fundamental causes and make sure it doesn't happen again". Mr Hughes stated he would "abide by the recommendations" of the investigation, which will report to the OBR's oversight board, the Treasury, and the Commons Treasury Committee, even if they suggest he should resign.
Meanwhile, the Institute for Fiscal Studies (IFS) labelled the Budget a "spend now, pay later" announcement, expressing scepticism about whether the tax rises scheduled just before the next election would actually be implemented. Conservative leader Kemi Badenoch called the event a "total humiliation" for Rachel Reeves and said "if she had any decency she would resign".
