Reeves says two-child benefit cap to go from April next year
Reeves says it is the government’s job to cut child poverty.
But there is one policy above all that has increased child poverty – the two-child benefit cap.
She says this has failed on its own terms. It has not cut the benefits bill, and it has not led to people having smaller families.
It has led to child poverty going up.
She says she does not think children should be penalised.
And she says the two-child benefit led to the rape clause, leading to women having to prove they were raped if they wanted to be exempt from the two-child limit.
She says that it humiliating. She will not tolerate, she says – saying she is the first woman to be chancellor.
And so she will abolish the two-child benefit cap from April.
Key events
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North Sea transition plan released
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Markets unruffled by budget
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Tax take heading to record high
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Badenoch says budget ‘littered with broken promises’
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Badenoch says Reeves will go down as Britain’s worst chancellor
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Reeves claims she has not broken Labour’s manifesto promises on tax
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Reeves says axing ECO scheme will cut average household bills by £150 on average
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Deutsche Bank: third largest tax-raising Budget since 2010.
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Reeves says two-child benefit cap to go from April next year
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Reeves says remote gambling duty rising to 40%, raising more than £1bn
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Reeves confirms new tax being introduced for electric cars
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Reeves confirms council tax surcharge, or ‘mansion tax’, for homes worth more than £2m
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Reeves claims tax reforms will mitigate impact of extra three-year thresholds freeze
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Reeves says mineworkers to get access to reserves in their pension fund
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Salary sacrifice pension contributions over £2,000 to be liable for national insurance, OBR document says
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Reeves says debt will fall by end of forecast
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New GDP growth forecasts largely worse than before
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Reeves says she will cut Isa allowance – unless some of it invested in stocks and shares
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Reeves says downgraded productivity growth forecasts are ‘Tories’ legacy’
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Reeves says OBR has updated growth forecast for 2025 from 1% to 1.5%
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Reeves starts budget statement by saying early release of OBR report ‘deeply disappointing’ and ‘serious error’
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OBR report: the key points
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Shadow chancellor Mel Stride says ‘leak’ of OBR report could be criminal offence
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UK borrowing costs fall as budget ‘doubles fiscal headroom’
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OBR apologises for accidental early release of its budget report
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OBR downgrades medium-term productivity growth to 1%, from 1.3% forecast in March
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Budget to create £22bn headroom, OBR report says
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OBR leak shows taxes rising to a record high, Lib Dem leader Ed Davey says
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Badenoch calls for inquiry into budget leaks
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Income tax thresholds will be frozen for another three years, to 2030-31 in budget, Reuters says
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Leaked OBR forecasts say GDP to grow by 1.5% over forecast period
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Farage says Reform UK will pay legal costs of farmers arrested at Westminster protest
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Starmer tells cabinet budget ‘not a spreadsheeet’, but about choices ‘centred in fairness’
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Reeves leaves Downing Street ahead of budget
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TUC general secretary Paul Nowak dismisses concerns about minimum wage rate rises as ‘scaremongering’
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What newspaper front pages are saying about the budget
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Resolution Foundation warns minimum wage rises for younger workers could do ‘more harm than good’
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Farmers stage budget day protest in Whitehall – despite Met police telling them to stay away
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Darren Jones says some pre-budget leaks have been ‘unacceptable, and not very helpful’
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Reeves says budget will involve ‘fair and necessary’ choices
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Budget to target cost of living crisis as Reeves battles to keep Labour MPs on side
North Sea transition plan released
Helena Horton
Ed Miliband, the energy secretary, just returned from Cop30, where he was talking up Labour’s manifesto commitment to end all new north sea oil and gas licences, and leading a global charge to phase out fossil fuels
But today, the north sea transition plan has just been released, and it allows for new drilling on or around existing oil and gas fields, in areas which aren’t currently licensed. These are called “tiebacks”.
Miliband is not calling these new licences, but Transitional Energy Certificates, and his department says they are “necessary for a managed, orderly and prosperous transition.”
Environment campaigners are not thrilled about this, but they are more concerned about the possibility of a licence for the giant new Rosebank oilfield, which has already been granted, being activated by the secretary of state issuing a consent.
This is because the amount of oil and gas that could be produced from them is relatively small: according to analysis by campaign group Uplift, new discoveries within a 50km radius of existing production sites – that would require a new licence to proceed – contain just 25 million barrels of oil and 20 million barrels of oil (equivalent) of gas.
For context, the Rosebank oil field would involve the extraction of nearly 500 million barrels of oil and gas-equivalent over the course of its lifetime.
Markets unruffled by budget
Jasper Jolly
After all of the build-up, chancellor Rachel Reeves may be relieved by the fairly calm early reaction on financial markets, our colleague Jasper Jolly reports from trading firm Saxo UK.
There has been some volatility: sterling dropped from about $1.3150 against the US dollar to $1.3123, before rising as high as $1.3220 – the highest since the end of October. That leaves the currency up by about 0.2% for the day.
Sitting on the 26th floor of a tower in London’s Canary Wharf financial district, Neil Wilson, investor strategist at Saxo UK, said:
“There’s no great stinging surprise that has upset markets. That has allowed it to be a bit of a relief.
“I just wonder about the credibility of the forecasts.
There was the initial flurry of excitement after the Office for Budget Responsibility accidentally released details early, but gilt yields have also been relatively steady – possibly because its forecasts were not as negative as expected.
UK 10-year gilt yields, the benchmark measure of government borrowing costs, were at about 4.5% before the leak, and rose up to 4.542%.
Higher yields mean higher borrowing costs, so the government will welcome the subsequent yield decline to 4.462% at the time of writing.
Mike Owen, a sales trader at Saxo UK, said:
“Everyone was fearing the worst, so the price action is, ‘Phew’. It’s such a minefield to try to get through it.
Here is the Treasury’s budget red book. The key section is the scorecard, which shows how much the government will raise or lose from all the measures. It starts on page 85. There are 88 items on the scorecard, which is a lot for a budget. Last year’s budget, which was a much bigger budget in terms of spending announcements and tax rises, only had 70 items.
(That helps to explain why it has been described as a smorgasbord budget.)
Tax take heading to record high
The revenue-raising measures announced by the chancellor means the UK’s tax take is heading to a record high in six year’s time.
The Office for Budget Responsibility has calculated that total public sector receipts are forecast to rise as a share of the economy from 38.9% of GDP in 2024-25 last year, to 42.4% of GDP in 2030-31. That’s an increase from £1.1 trillion to £1.5 trillion.
Within that, the tax take (defined as National Accounts taxes as a share of GDP) is forecast to increase from 34.7% of GDP in 2024-25 to a peak of 38.3% of GDP by the end of the forecast period.
That 2030-31 peak would be a historic high and a 5.4 percentage point increase on the pre-pandemic level of 32.9% of GDP in 2019- 20.
The OBR warns that this high tax take creates risks to the economy, and to its forecasts.
A higher level of the tax take increases the risk that incentives within the tax system distort or constrain economic activity by more than expected.
The yield from the personal tax threshold freezes, extended in this Budget, is very sensitive to future inflation and nominal earnings growth. If nominal earnings growth was 1.8 percentage points lower than forecast, this would reduce personal tax revenues by 2029-30 by £19 billion.
Badenoch says budget ‘littered with broken promises’
Badenoch says the government is paying more to borrow than the government did when the Tories were in power.
She says Reeves blames everyone else for the situation is in. But her decisions are to blame, she says.
She says Reeves released most of the speech in advance.
This has made the UK a “shambolic laughing stock”, she says. She says Reeves should resign for that, if she does not resign for her decisions.
She says all the key indicators are going down.
And all we have had from the chancellor have been soft articles featuring her “whining” about misogyny and mansplaining.
She says people are not criticising Reeves because she is a woman.
Let me explain to the cchancellor woman to woman, people aren’t complaining because she’s female – it’s because she’s incompetent.
She says Reeves interrupted people at breakfast with a speech that told them income tax was going up. But then three days later, she changed her mind.
She describes Reeves as “spineless, shameless and completely aimless”.
The budget is “littered with broken promises”.
Reeves promised to help savers, but today she is raising taxes for savers, Badenoch says.
She says Labour promised not to raise council tax rates. But they are now introducing a new charge that won’t even raise very money.
And Badenoch says Reeves admitted in her budget speech last year a tax freeze would be a breach of the manifesto.
The real story is “Labour have lost control of welfare spending”, she says.
As the chancellor sat down, the Office for Budget Responsibility (re)released its Economic and Fiscal Outlook.
There must be red faces at the OBR, after they accidentally published it two hours ago (they apologised for this earlier). You can read it here.
Badenoch says Reeves will go down as Britain’s worst chancellor
Badenoch started by saying she hoped Reeves enjoyed the budget, because it would be her last.
She said the budget was a “total humiliation”. And she said Reeves will go down as the country’s worst chancellor.
Kemi Badenoch is responding to the budget now.
As Jason Groves from the Mail pointed out earlier, she is better briefed than leaders of the opposition normally are responding to a budget.
Tory policy chief Neil O’Brien has passed a folder to Kemi Badenoch detailing key points of the OBR forecast. For the first time, the leader of the opposition will deliver the Budget response with full knowledge of the facts
Reeves claims she has not broken Labour’s manifesto promises on tax
Reeves says the OBR has confirmed that her budget choices will reduce inflation by 0.4%.
She ends by saying that she has been able to take action on the cost of living, while keeping her election manifesto promises on tax.
There are many people who will argue that freezing tax thresholds does break the manifesto – and they are likely to quote what Reeves herself said on this last year when they make this argument.
Reeves says axing ECO scheme will cut average household bills by £150 on average
Reeves says energy bills are high.
The government is investing in insulation.
But that is not enought.
The Tories’ ECO (energy company obligation) system costs more than £1bn a year, she says. But she says, for many families, it costs more than they save. So she will scrap it.
She says this move will cut the average household bill by £150 on average.
Deutsche Bank: third largest tax-raising Budget since 2010.
Sanjay Raja, Deutsche Bank’s chief UK economist, has calculated that today’s budget is the third largest tax-raising Budget since 2010.
[that’s after the March 2021 and the October 2024 Budget, I think].
Raja explains:
Nearly £30bn in taxes were announced, with the extension of the fiscal drag and tapering of pensions and employee salary sacrifice schemes making up the bulk of the tax raising measures. Increases in property tax, gambling tax, and a tax on electric vehicles were also announced. But tax hikes were offset by spending rises elsewhere, which amounted to £12bn.
Raja adds that despite the OBR’s downgrades on productivity, the Chancellor was left with larger headroom than anyone expected going into this forecast, offset by stronger earnings growth and equity prices.
He concludes:
Put simply, the OBR projections were far better than we expected, with the impact of the productivity downgrade on the borrowing outlook far less than we and others anticipated. A smaller hit to the fiscal headroom therefore required a smaller amount of fiscal consolidation.
Reeves says petrol is still expensive.
So the 5p cut in fuel duty will be extended until 2026, she says.
Reeves says she knows people still face pressure.
She says the state pension will rise by £440 a year, and more for people on the new state pension.
The national living wage and national minimum wage are going up, she says.
Reeves says two-child benefit cap to go from April next year
Reeves says it is the government’s job to cut child poverty.
But there is one policy above all that has increased child poverty – the two-child benefit cap.
She says this has failed on its own terms. It has not cut the benefits bill, and it has not led to people having smaller families.
It has led to child poverty going up.
She says she does not think children should be penalised.
And she says the two-child benefit led to the rape clause, leading to women having to prove they were raped if they wanted to be exempt from the two-child limit.
She says that it humiliating. She will not tolerate, she says – saying she is the first woman to be chancellor.
And so she will abolish the two-child benefit cap from April.
Reeves says remote gambling duty rising to 40%, raising more than £1bn
Reeves is now talking about gambling.
Remote gaming duty is associated with the highest rate of harm. She says the duty on that is going up from 21% to 40%.
But there will be no increase for in-person gambling, or horse racing.
And the duty on bingo will be abolished, she says.
She says this will raise more than £1bn by 2031.
And she says she will not need to raise income tax, national insurance or VAT
The introduction of a £2,000 cap on salary sacrifice into pensions could deter savings, experts warn.
As the chancellor explained, contributions above that level will be taxed at the same rate as other pension contributions. She argued that it won’t affect lower earners (who cannot afford to sacrifice very much salary).
The OBR estimates it will raise £4.7bn in 2029-30.
James Dean, pensions partner at law firm Freeths, warns it could deter people from saving for their pensions
“The decision to cap salary sacrifice contributions to pension schemes will be incredibly unpopular across the pensions industry. Introducing this measure from 2029 risks sending the wrong signal at precisely the wrong time.
With many people already struggling to save enough for their retirement, this policy could hugely discourage pension savings and undermine long-term financial security. Rather than incentivising individuals to build adequate retirement pots, it risks creating further barriers to saving.”
Penny Cogher, pensions partner at national law firm Irwin Mitchell, argues it might be better to review the entire pensions salary sacrifice system:
“The Chancellor’s proposed £2,000 cap on salary sacrifice for pension contributions risks adding complexity without delivering meaningful benefits. Payroll teams already face challenges with pension administration, and this change could increase costs and error – particularly for smaller businesses. Many lower-paid workers would still see little advantage, and companies without existing arrangements are unlikely to adopt them for such limited gain.
Reeves confirms new tax being introduced for electric cars
Reeves is now talking about cars.
She says she is introducing a new vehicle excise duty for electric vehicles (EVs).
Reeves says she is cutting the 100% relief on capital gains tax on businesses sold to employee ownership trusts. That will be cut to 50%, she says.
Reeves sets out the salary sacrifice plans. See 1pm.
