Rachel Reeves unveiled £15 billion in personal tax increases as the foundation of her budget, featuring a three-year threshold freeze alongside new measures including a high-value property surcharge and restrictions on pension tax relief. The fiscal announcement came amid chaotic circumstances after the Office for Budget Responsibility accidentally published the entire budget an hour early, triggering bond market reactions and fierce political criticism before the chancellor could formally present her plans to Parliament.
The chancellor defended her approach as necessary to restore fiscal stability while maintaining support for families facing economic pressures. Reeves argued that her budget strikes the appropriate balance between revenue generation and social investment, creating conditions for sustainable growth while protecting vulnerable populations. She emphasized that inflation reduction and infrastructure development would benefit all citizens in the medium to long term.
The budget’s most transformative social policy abolishes the controversial two-child benefit limit, fulfilling a key demand from Labour’s parliamentary wing and anti-poverty campaigners. The measure will immediately improve conditions for 450,000 children currently living below the poverty line. Government analysis indicates this change, combined with complementary welfare reforms, will achieve the largest reduction in child poverty within a single parliamentary term since such statistics were first recorded.
Revenue generation relies heavily on personal taxation, with the extended threshold freeze dragging more earners into higher tax brackets as wages increase. Additional measures include capping salary-sacrificed pension contributions at £2,000 from 2029, expanding gambling taxes, introducing mileage-based charges for electric vehicles, and implementing a council tax premium on luxury properties—the so-called “mansion tax.” These actions collectively transform a projected £4 billion shortfall into a comfortable £22 billion fiscal buffer.
The chancellor announced several cost-saving measures for households, including a £150 reduction in annual energy bills through the elimination of environmental levies and frozen prices for rail travel, motor fuel, and prescription medications. The package should reduce headline inflation by 0.3 percentage points from its current 3.6% level, which remains the highest among G7 nations and significantly exceeds the 2% target. Despite these positive interventions, economic growth forecasts show a downward revision for 2026 from 1.9% to 1.4%, though government borrowing is projected to decline from 4.5% of GDP to 1.9% by 2030-31.