FTI Consulting UK Public Affairs Snapshot: Autumn Budget 2025: No surprises, but plenty still to prove

If last year’s Budget was the Chancellor’s opportunity to set out her economic vision for the country, the challenge today was somewhat more daunting: rebuild fiscal headroom, keep Labour MPs on side, and persuade the electorate that this is a government which can – still – deliver economic growth. With a widening fiscal gap, jittery bond market, and increasingly insubordinate backbench cohort, it was hardly an enviable task.  

Yet nobody could quite have foreseen the added challenge of the Office for Budget Responsibility inadvertently publishing most of the Budget before the Chancellor took to the despatch box. This is a serious, though accidental, blunder on the part of an already beleaguered OBR, and the leak meant that the media, the Opposition and financial markets had an additional hour to react to the measures before they had been presented to the House of Commons – ensuring that the headlines were all but written by the time Reeves began her speech.

Those headlines will not be overwhelmingly positive. Despite the Chancellor’s promise in 2024, that those significant tax rises were the exception, this was undoubtedly another tax-and-spend Budget, with a total of £26 billion in tax rises forecast by 2030. The largest revenue raiser will be the heavily trailed freeze on personal tax and national insurance thresholds, with a 2 per cent increase planned for the non-labour elements of income tax. Also in the “smorgasbord” of tax rises is confirmation that NICs will be charged on salary-sacrificed pension contributions, a new mileage-based tax on electric vehicles from 2028, and reduced capital gains tax relief on disposals to employee ownership trusts. Sin taxes were also deployed, with significant increases to gambling duties, uprating of alcohol and tobacco duties, and a widening of the soft drinks industry levy.

Yet there were “good news” stories too, particularly for Labour MPs who have long advocated for the abolition of the two-child benefit cap. The Chancellor confirmed, to cheers, that the cap would be scrapped in full from April, that benefits would increase in line with inflation, and that, from 2028, there will be a “mansion tax” on properties worth over £2 million: all red meat to the Labour back benches. While acknowledging that the freezing of personal tax thresholds will hit “working people”, Reeves can confidently present this as a Budget rooted in Labour values.

Reeves was largely able to do this on the back of better-than-expected news from the OBR. Although medium-term growth and productivity forecasts were disappointing, near-term economic growth forecasts were upgraded from 1% to 1.5% and, crucially, projected wage increases mean more money going into the Exchequer. That means significantly less fiscal deterioration than had been expected, which resulted in a relatively positive market reaction, with the FTSE rising by 0.2% in early afternoon trade.

While there will be grumbling from business around the scale of the tax burden and many of the specific measures included – with the salary sacrifice scheme already sparking particular concern – Reeves has likely avoided the scale of the anger she faced following last year’s changes to employer National Insurance Contributions (NICs). The catch, of course, is that the last year has seen the Government’s relationship with business grow increasingly rocky. After a series of frustrations, businesses had been primed for – and were resigned to – disappointment. 

For them, this Budget is unlikely to shift the dial. Indeed, by attempting to plug fiscal gaps with a complex patchwork of different measures, Reeves has in many ways created further longer-term problems for the Government. While the so-called fiscal “buffer” has been fortified, creative thinking to boost productivity remains absent (although there is a hope that AI will help), and the unprecedented level of pitch-rolling in the Budget development process, with a series of measures trailed, publicly debated and then withdrawn, has dented investor confidence. The main worry is that even a headroom of just under £22 billion is not particularly large and, as the OBR notes, leaves the economy exposed to future shocks. We may be here again come Autumn 2026.

Today’s Budget will prove to be inseparable from the broader political fortunes of the Chancellor and the Prime Minister. It has not been an easy month for them, but, with moderately improved growth forecasts, measures on welfare which will unify the Labour Party, and a polished performance at the despatch box, leadership challengers are likely to remain at bay for now. Survival is, to a certain extent, success. But it will be difficult to argue that this was a breakthrough Budget.