Chancellor Rachel Reeves has announced a budget that will cut living costs for millions, including ending the two-child benefit limit and reducing energy bills, but taxes are set to rise by £26bn to plug a shortfall in public finances. Reeves declared the measures would put the economy on a sustainable path while building a fairer, stronger Britain by tackling inflation and investing in infrastructure.
The budget was leaked early in an accidental release by the Office for Budget Responsibility, triggering an instant bond market reaction an hour before Reeves spoke in the Commons. She built a £22bn headroom to stave off future speculation about missing fiscal rules and to lower borrowing costs.
Reeves placed a £15bn increase in personal taxes at the centre of her revenue-raising efforts, including a three-year freeze on tax thresholds. One in four workers will pay the higher income tax rate by 2030 due to the freeze. Other measures include a £2,000 cap on tax-free pension contributions from 2029, higher gambling taxes, a mileage-based charge on electric vehicles, and a high-value council tax surcharge dubbed a ‘mansion tax’.
Reeves confirmed the removal of the two-child benefit limit, lifting 450,000 children out of poverty, and described it as a personal mission to end child poverty. She also announced a £150 reduction in energy bills by freezing green levies, which she said would reduce headline inflation by 0.3 percentage points next year.
