Budget 2025 live: Rachel Reeves faces day of reckoning as she unveils billions in tax rises

Rachel Reeves has acknowledged public anger and frustration at the state of the economy as she prepares to announce further tax increases to balance the books.

In a speech filmed ahead of the budget, the Chancellor said the Government had begun to see results last year, with “wages rising faster than inflation, hospital waiting lists falling and our economy growing faster and stronger than people expected”.

“But I know there is more to be done,” he said. “I know the cost of living is still putting pressure on family finances, I know people are frustrated with the pace of change or angry at the injustice in our economy.

“I have to be honest that the damage from austerity, chaotic Brexit and the pandemic is worse than we thought.

“But I will not run away from these challenges, nor will I accept that our past should define our future. It doesn’t have to be this way.”

The OBR will publish its latest forecasts after the Chancellor’s Budget speech on Wednesday, and sources have told Sky News it will cut its growth forecasts for 2026 and the remaining years of the current parliament.

The OBR is an independent body that provides analysis of the country’s public finances and was established by former Tory chancellor George Osborne in 2010 following the 2008 financial crash.

Twice a year it publishes detailed five-year forecasts alongside the Budget and spring statement to assess the impact of any tax and spending measures and analyze whether the government is meeting its fiscal targets.

The questionable downgrade is a result of the expected decline in productivity in the UK as part of a recalibration of previously inaccurate forecasts.

But Ms. Reeves’s own moves are likely to be blamed.

Rachel Reeves said she would make “fair and necessary choices” in her highly anticipated Budget today.

In a video posted on social media hours before standing in front of the letterbox in the House of Commons, he said the damage done by 14 years of Tory government was “worse than we thought”.

“Today, I will hold fair and necessary elections to fulfill our promise of change,” he said.

“I will not take Britain back to austerity.”

David Maddox, political editor of The Independent, reports:

The Chancellor will try to claim that his now-infamous election manifesto promise not to increase income tax, VAT or national insurance contributions has not been fulfilled, but he will be wrong.

By re-freezing income tax thresholds, an extra 1.3 million people will pay 40p tax, a higher rate than they would normally pay.

In fact, the chancellor last year ruled out extending the threshold freeze introduced in 2021 because it would mean fulfilling his manifesto promise to increase income tax.

He avoided making extra room for real rates, but more people will pay income tax at all levels simply through stealth tax.

Albert Toth from The Independent reports:

Chancellor Rachel Reeves will announce the Autumn Budget at around 12.30pm on Wednesday, following Prime Minister’s Questions.

HM Treasury will then publish budget documents containing technical details of economic forecasts and proposed tax changes.

Opposition leader Kemi Badenoch will then respond, followed by Sir Ed Davey, leader of the third largest party.

The Office for Budget Responsibility (OBR), the budget watchdog, will also publish revised forecasts for the economy and public finances.

The government announced ahead of the Budget that minimum wage rates will be increased next year.

From next April, the national living wage will rise by 4.1 per cent to £12.71 per hour for eligible workers aged 21 and over. The government said it would increase a full-time worker’s gross annual earnings by £900 and benefit around 2.4 million low-paid workers.

The national minimum wage rate for 18 to 20-year-olds will rise by 8.5 per cent to £10.85 per hour, and for 16 to 17-year-olds it will rise to £8 per hour.

However, amid a tough job market for young people, the Resolution Foundation warned that “these steep increases risk causing more harm than good if they deter firms from hiring.”

The freeze on income tax thresholds will be extended when Rachel Reeves delivers her budget on Wednesday, according to reports.

The Chancellor has abandoned plans to raise the headline rate of income tax, which would have breached Labor’s promise not to introduce national insurance, VAT or income tax.

The freeze will result in more people being dragged into paying tax for the first time or shifting to a higher rate as wages rise.

Accordingly TimesThresholds will be frozen for a further two years as Ms Reeves looks at a ‘buffet’ of tax rises to fill gaps in public finances.

Rachel Reeves will present her long-awaited budget today with a series of tax increases as she looks to plug gaps in public finances.

Speculation has been swirling for months about what the chancellor will announce in his financial statement.

The Chancellor had laid the groundwork for a manifesto-busting increase in income tax, but the idea has apparently been abandoned.

Speaking ahead of the budget, Ms Reeves said people were “angry at the injustice” in the UK economy.

In a speech captured on film, he said: “To be honest, the damage from austerity, chaotic Brexit and the pandemic was worse than we thought.

“But I will not run away from these challenges, nor will I accept that our past should define our future. It doesn’t have to be this way.”