Before today, and with only one Budget under her belt, Rachel Reeves, was already the most unpopular Chancellor during the last 50 years. Her first in October 2024 was one of the biggest tax-raising Budget in decades, drawing the ire of farmers and businesses in particular. At the time, this was supposed to be a ‘one and done’ for this parliament but as time went on, it was becoming increasingly clear that this was wishful thinking. Indeed, this Budget has become the most anticipated due to the volume of speculation, U-turns and leaks about potential tax rises as well as breaking of Manifesto pledges for weeks leading up to the big day. The past year could actually be seen as a case-study of how not to communicate stability, certainty and confidence in the economy, Number 11 and its Budget.
With Budgets, it is traditional to try to anticipate what rabbit the Chancellor will pull from the hat. But today, the rabbit drama occurred before the main event, with an ‘OBR OMG’ as the Office for Budget Responsibility mistakenly published details of the Budget early. We knew big taxes were coming but this essentially told us before the Chancellor even took to the floor of the Commons where and when these would fall. Whilst increased welfare spending is set to rise in the near term, much of the fiscal pain has been backloaded towards the end of this parliament. This is effectively delaying the tough decisions to just ahead of next General Election and potentially raises questions about the credibility of this government’s ability to get the public finances under control. It’s essentially a case of spend now, tax later.
In terms of the spending, the main policy change was the removal of the two-child benefit cap which will have a particularly large positive impact for Northern Ireland due to the average family size here being bigger than elsewhere in the UK. There was also additional money for the devolved nations with an additional £370m for Northern Ireland. But taxation was definitely the bigger theme of the Budget with creative ways of raising revenue deployed. Whilst increases in the more traditional tax rises such as income tax and VAT were ruled out, we did see the ‘milkshake and latte tax’, the ‘Uber tax’, the ‘tourism tax’ and the new electric vehicle tax amongst a smorgasbord of measures. Some of the more significant revenue-raisers included increasing ‘remote gaming duty’ to 40% and a new remote betting rate at 25%. There was also the increase in basic and higher income tax rates on property, savings and dividends by 2 percentage points. A whopping £4.7billion is also set to be raised by curtailing tax breaks on salary sacrifice pension contributions. This represents increased costs for employers and employees alike.
But the biggest revenue-raising measure isn’t actually a tax rate increase as such. The Chancellor’s decision to extend the freeze on National Insurance and Income Tax thresholds for another three years beyond 2028 will drag more people into higher tax bands over time. Over the past five years, the number of higher rate income taxpayers (40%) in Northern Ireland has doubled to 131,000. One in seven Northern Ireland income taxpayers are now paying the higher or additional rates and this will increase to close to one in five by 2030. It was one in 18 in 2000.
There were 42 tax policy measures mentioned in this Budget, living up to the expectation regarding the need for tax increases. However, it has transpired that the tax increases of £26bn by 2029/30 are used to fund £11bn more spending and to double the fiscal buffer to £22bn, keeping the Chancellor well within her fiscal rules. But the concern is that this is a tax and spend Budget rather than a growth and reform Budget. There is nothing in it, according to the OBR, that will shift the economic dial and generate more growth. Furthermore, increases in the National Living Wage will add to the costs of business, particularly in hospitality and there are concerns that this will lead to reduced employment opportunities for young people and graduates.
Whilst much of what the chancellor announced will be popular within the Labour Party, the jury is still out on whether she can make the tough decisions on reducing welfare spending and driving economic growth. Ultimately this is what the markets, the business community and, regarding growth at least, the electorate, want. She has embraced the joy of tax. She now needs to embrace the joy of growth and reform.
Global glory for Galgorm as resort secures top international hotel titles and announces opening date for new forest spa
27th Nov 2025
Read Article