Labour’s Chancellor of the Exchequer, Rachel Reeves, has revealed that the much-anticipated 2025 Budget will be delivered on November 26, amid mounting pressure over the UK’s financial stability. With inflation continuing to strain household budgets, Reeves faces a difficult balancing act in her second Budget since Labour’s resounding election victory.
The later-than-expected date for the Budget is designed to allow Reeves more time to present measures aimed at boosting productivity. Experts have raised concerns, however, that this could be coupled with significant tax hikes to address the growing fiscal gap.
Focus on Inflation and Economic Growth
The 2025 Budget comes at a crucial time for the UK economy, which remains under pressure due to high inflation and rising borrowing costs. According to the Chancellor, her primary objective is to reduce inflation, which has been a major driver of cost-of-living increases across the country.
Reeves has acknowledged the ongoing financial strain on ordinary workers, saying that “Bills are too high, and you feel that you’re putting more in, but you’re getting less out. And that has to change.” signalling her intention to make life more affordable for everyday people. She has stressed the importance of tight fiscal control to bring inflation down, noting that the government’s ability to fund essential services like the NHS hinges on achieving fiscal stability.
Reeves also highlighted that economic growth and investment remain key pillars of her economic strategy. While her previous Budget saw tax increases on businesses and capital gains taxes, she has indicated that this year’s Budget will focus more on driving economic growth through investment, particularly in infrastructure and the public sector. However, economists have raised concerns that this growth might come at the cost of higher taxes.
Tax Hikes: The Inevitable Response to a £41 Billion Shortfall?
One of the biggest challenges Reeves will face in her 2025 Budget is the projected £41 billion shortfall in public finances by 2029-30, as identified by the National Institute of Economic and Social Research (NIESR). Experts suggest that to balance the books, Reeves may be forced to raise taxes further, a prospect that has been met with mixed reactions.
According to the NIESR, the Chancellor’s fiscal strategy will need to include tax increases to make up for this deficit. However, Labour’s manifesto commitments, which include avoiding tax hikes for “working people,” will likely prevent any increases in VAT, national insurance, or income tax. This leaves open the possibility of increased taxes on corporations and other high-income earners, which would align with the approach of Reeves’ previous Budget.
