Rachel Reeves is under mounting pressure following a Budget that increased taxes by £26 billion and was eclipsed by an unprecedented leak from the Office for Budget Responsibility (OBR). The Chancellor’s measures leave the UK heading towards a record tax burden, with higher levies introduced to address weaker economic forecasts and fund rising welfare costs. Central to this was the decision to scrap the two-child benefit cap, a move expected to lift 450,000 children out of poverty.
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After ruling out an income tax rise, Ms Reeves introduced a series of smaller tax increases to ensure her spending plans complied with borrowing rules. These include a new pay-per-mile charge for electric vehicles, higher taxes on online betting and a “mansion tax” on homes valued above £2 million. However, she continues to face criticism for freezing tax thresholds until 2030/31 and applying national insurance to some pension contributions, prompting accusations of breaking Labour’s pledge not to raise taxes on “working people”.
Economic experts will deliver their full assessments on Thursday, with the Institute for Fiscal Studies (IFS) and the Resolution Foundation already flagging concerns. Initial analysis from the Resolution Foundation highlighted a potential fall in living standards, driven in part by threshold freezes contributing to a downgrade in forecasts for real household disposable income. The think tank warned that taxing pension contributions would reduce take-home pay and deter saving, while also noting that the Budget’s focus on cost-of-living support had uneven effects across households.
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The IFS described the Budget as a “spend now, pay later” approach, questioning whether key tax rises planned ahead of the next election would actually materialise. Meanwhile, Conservative leader Kemi Badenoch called the Budget a “total humiliation” and urged Ms Reeves to resign. The entire announcement was overshadowed by an unprecedented OBR error that saw its economic assessment published before the Chancellor’s speech. The OBR apologised and launched an internal investigation, with chairman Richard Hughes promising to accept any recommendations, including those calling for his resignation.
