What to expect in budget 2025: tax, VAT, pensions, savings and more

"The financial position How much money Reeves can spend without increasing borrowing levels has become a crucial test in this budget. The chancellor wants to borrow cheaply and that means keeping the bond markets onside. With a spending gap estimated between 20bn and 30bn, and no recourse to extra borrowing, closing it will demand some hefty spending cuts or tax rises."

"It is understood that a review of investment and productivity by the OBR across the private and public sectors has resulted in a downgrade of the UK economy's capacity to grow in not just one, but each of the five years in its forecast. Reeves has tried to persuade OBR officials that her measures to increase investment will turn the situation around. However, the OBR is likely to say the chancellor's actions are not enough to fully reverse the downgraded trend."

"The speaker of the House of Commons, Lindsay Hoyle, called it the hokey cokey budget in blasting the chancellor for keeping parliament in the dark while what was likely to be in the budget was debated in the press. There was a moment when Reeves appeared to have No 10 on side with a plan to increase income tax by 2p, offset by a 2p cut in national insurance to raise about 6bn from higher rate taxpayers. But a backlash from Labour MPs concerned about the chancellor breaching a manifesto promise to leave the main tax rates untouched scuppered the plan."

Numerous policy ideas were floated in the run-up to the budget, with many promoted through the media and some quickly abandoned. The volume of leaks prompted criticism that parliament was kept in the dark. A central fiscal test is how much Reeves can spend without increasing borrowing, because cheap borrowing depends on keeping bond markets onside. A spending gap of £20–30bn, without extra borrowing, requires significant spending cuts or tax rises. The OBR has downgraded forecast UK growth across each of the five years, and is likely to judge announced investment measures insufficient to reverse that downgrade. A proposed swap of a 2p income tax rise for a 2p national insurance cut to raise about £6bn was abandoned after Labour backbench opposition over manifesto commitments.

Read at www.theguardian.com