After much speculation, Rachel Reeves has presented her second Budget following a significant blunder by the Office for Budget Responsibility. Key measures in her announcement include scrapping the two-child benefit limit and halting rail fare increases. The Chancellor introduced controversial policies like freezing income tax thresholds, resulting in £26 billion in tax increases, with a focus on redistributing the burden to those more financially capable.
While the freeze on fuel duty is extended until September 2026, the OBR projects a phased reversal of the 5p cut from April 2027. The Budget also revealed a downward revision in real household disposable income growth, attributing it to slower wage increases and higher taxes.
Future tax hikes are anticipated post the next general election, with a projected rise of £23,150 million in total tax for 2029-30. Additionally, the introduction of digital ID cards is estimated to cost £1.8 billion over three years, leading to potential budget cuts elsewhere.
In education, schools may face budget reductions due to changes in Special Educational Needs and Disabilities funding. The OBR warns that the estimated £6 billion cost in 2028-29 might impact mainstream school spending negatively unless a clear plan is outlined.
Reeves’ implementation of a new mileage tax on electric vehicles is expected to decrease car sales by 440,000 by 2031, with an estimated annual cost increase of £240 for drivers. However, measures within the Budget aim to offset some lost sales and encourage electric vehicle purchases.
Furthermore, the abolition of the Office for Value for Money, intended to eliminate government waste, was disclosed. The organization’s responsibilities have been absorbed by the Treasury following an evaluation confirming its effectiveness.
The Budget also addresses issues like salary-sacrificed pension contributions, alcohol duty increases, and the Digital Services Tax review, reflecting a mix of challenges and adjustments affecting various sectors.