Chancellor Rachel Reeves has declared an economic emergency in her latest Budget speech, announcing £26bn in tax rises to stabilise the public finances. The measures come after the Office for Budget Responsibility (OBR) published details hours early, sparking chaos in the Commons.
Reeves cited a summer rethink by the OBR, which downgraded the UK’s productivity outlook due to Brexit, Covid, and stop-go investment. However, the aggregate hit to public finances was only £5.5bn, partly offset by higher wages and inflation boosting tax revenues.
To create fiscal headroom and reassure bond markets, Reeves extended the freeze on income tax thresholds and raised taxes on savings and property income. She also announced changes to council tax for high-value properties, aiming to ensure the wealthy pay more.
The Chancellor focused on reducing inflation, which the OBR says could be cut by 0.4 percentage points through freezing train fares and prescription costs and shifting green levies off utility bills. Reeves hopes this will calm bond markets and pave the way for Bank of England rate cuts.
Critics note that the Budget follows a series of U-turns, including on winter fuel payments and welfare cuts. Employers warn that previous rises in employer national insurance have squeezed hiring and driven up inflation.
