Budget 2025: has Reeves done enough?

In Chancellor Rachel Reeves own words, budget 2024 was a “once in a parliament” set of tax rises designed to secure the UK’s public finances. Twelve months later, she was back in the Commons for budget 2025 making the same case. With Tory and Reform rivals now preaching the virtues of fiscal responsibility, the Chancellor should have been on safe ground “fixing the foundations”. Instead, a succession of u-turns, compromises and forecast downgrades posed a next set of challenges in providing Labour evidence of hard-won economic momentum.

As budgets go, Reeves had no hope of surprises. Most of her announcements were leaked in advance, including an unprecedented publication of all measures 20 mins before she stood up by the OBR. There was also little prospect she could successfully land a “once in a half century” rise to the basic rate of income tax with Labour’s popularity stalling. Instead, the Chancellor defaulted to plan A: a smorgasbord of Treasury favourites, targeted at spreading the pain.

In truth, a second budget performing major surgery was always going to be a tough sell. After nearly 18 months in office, the fruits of long-term investment could hardly hope to be ready. Global trading conditions remain highly volatile. But Reeves did provide Labour MPs with several measures to cheer about:

• £120 billion pounds investment in capital maintained
• Defence investment at 2.6% by 2027
• 5.2 million more NHS appointments since the election
• 250 new neighbourhood health centres by 2030
• Business rates permanently lower for 750,000 retail properties
• Training for apprenticeships for all under 25s to be free
• An end to the two-child benefit cap, promised to lift 450,000 children in the UK out of poverty

Yet she also posed several contradictions at the heart of Labour’s economic plan:

• A freeze on income tax thresholds and a raid on pension contributions testing middle income strivers
• A rise to the National Minimum Wage rewarding the lowest paid, but potentially stalling job creation
• Taxes targeting the asset rich, but potentially impacting middle England saving
• A pay-per-mile charge on EVs, at odds with Labour’s mission to make the UK a clean energy superpower
• Promises of further welfare reform after July’s hurried climbdown

Perhaps most concerning of all, there was almost no hint of sunny uplands to come. £66 billion pounds of tax rises in two successive budgets, the tax burden at an all-time high, and many individual tax rises scheduled to drop just as voters go to the polls in 2029. Blame for the pandemic, Brexit and the Conservatives, with no obvious money eventually back in the wage packets of the electorate. Even tax rises on gambling, milkshakes, vaping, taxis and tourism felt like a tax on fun.

Reeves probably did enough to get by. And Labour always said it needed ten years to fix the Tories’ economic inheritance. But this needed to be a much bigger moment to turbocharge confidence. Labour’s definition of “working people” got even more stretched and manifesto promises were only technically kept. The likelihood that Labour MPs will tolerate the pain of a third budget in 2026 pushing taxes up is low. The spring statement in March therefore must deliver good news. Or else the aftermath of May’s local elections could well challenge both Reeves and Starmer together.