A Budget for 2030, not for today’s citizens; breaking down the tax policy from the Budget

Introduction:

This year’s UK Autumn Budget marked some significant policy: most notably the scrapping for the two child benefit, extending the freeze of personal tax threshold from 2028 to 2031 and new forms of taxation such as the ‘mansion’ tax and a mileage-based tax for electric vehicles. Whilst the Budget was pragmatic and realistic, it fuels public dissent, especially given the promised benefits may not be certain and violate manifesto pledges.

Analysis of Tax Policy

The budget aims to raise taxes by £26 billion by 2029-30, with the biggest proportion coming from the freezing tax threshold (£8 billion) and the cap on salary sacrifice pensions (£4.7 billion). Crucially, the freeze on national insurance and cap on salary sacrifice for pensions both violate Labour’s manifesto of not ‘increasing taxes on working people’, adding onto the dissent from the British public.

Through the increase in taxation, the Budget aims to double the headroom to £21.7 billion. This has appeased many investors. For instance, Vanguard’s head of international rates has gone back to favouring British government bonds, especially as given the increased fiscal headroom, it allows the Bank of England to cut rates. However, there are still causes for concern. The key flaw in the Budget is that short-term spending is expected to increase dramatically and only in 2029-30 will the impacts of the increase in taxes be longer. This is reflected in the OBR’s forecast, that government debt will increase to 97% of GDP by the end of 2028/9 and then fall to around 96.1% of GDP at the end of 2030/1. Public spending is due to be £32 billion/year higher in 2029/30 than had been previously forecasted. However, if economic growth is poor, tax revenue may be lower than expected. Since the start of Starmer’s government, GDP per capita has grown by 1% and, looking at the Budget, little has been done to address improving long term growth. This  is a crucial misstep given the UK’s continued poor productivity. Additionally, youth unemployment remains dire (currently at 15.3%) and, in general, confidence in the UK economy is weak. As such, consumption is likely to remain weak. Therefore, weakness in the economy in the short-run creates uncertainty as to whether the UK can really create a large fiscal headroom and generate as much tax as promised.

Response from Public

According to YouGov, 48% of Britons see the Budget as unfair in comparison to 21% who saw it as fair. This ratio of fairness has been the second worst YouGov has seen since 2010, only succumbing to the disastrous 2022 mini Budget under Liz Truss. Only 3% think the changes will leave themselves better off and only 7% expect the economy to improve over the next 12 months. The poor reactions stem from the increased spending and borrowing, which will in turn create a heavier tax burden especially during a continued cost of living crisis. Most of the benefits reaped from the budget will be reaped from 2029-30 onwards. Additionally, breaking manifesto promises further worsens cynicism towards the Labour government – after the Budget only 15% of people say the government is handling the economy well.

Policy Recommendations

The Budget lacked two areas which should be accounted for in future policy. Firstly, as reflected in public sentiments, less is being done on current living standards. Secondly, not enough is being done on solving the core economic problems in the UK: a lack of productivity. The Budget did make some strides towards it through: greater spending on education, making apprenticeship training free for SME and any 18-21 on Universal Credit who haven’t studied or worked in more than 18 months will be offered 6-month paid work placements. However more policies could be introduced which would specifically make the UK more competitive internationally.

1. Firstly, the government can introduce temporary measures to boost the current cost of living crisis. For example, they could introduce a temporary council tax rebate for low-middle income households or increase Universal Credit work allowance to improve current living standards. Whilst these measures could increase short-term borrowing and is less of a structural fix, the benefits it provides are much more pertinent. With these more visible improvements of living standards, public sentiment would increase which is important given the apparent breaching of their manifesto.  Greater confidence would also boost more spending rounds and therefore boost the UK economy.

   
   

2. Secondly, the government should introduce policies to boost investment into longer-term projects such as AI and green energy. Not only would it address the issue of poor productivity, which has not been adequately addressed, but also makes the UK more internationally competitive in these emerging markets. Whilst these projects have high start-up costs and there are risks attached in ensuring such projects are continued to completion, if successful many of the structural issues of the UK economy would be alleviated. Not only would it boost the economy with more productive and high-skilled workers but also place the UK ahead of the curve with new technology.

To summarise, to tackle the short-term economic costs of the Budget, the UK should consider temporary measures to boost the economy and ensure that confidence in the economy (which as discussed the Budget is very dependent on for its ‘fiscal headroom’) is high. Secondly, to further develop productivity in the UK, there should be greater investment in green energy and AI.

Conclusion

Overall, the Budget is a realistic interpretation of the OBR’s projections. However the public’s dissent towards the Budget is completely understandable especially given how long-away the benefits of the budget seem to be and the uncertainty behind them. In addition to the Budget, the government should consider firstly short-term measures to counteract public dissent specifically in visibly improving living standards which would also temporarily boost the economy as well. Additionally, in the long-term the government still needs to focus on resolving the UK’s poor productivity which would be best resolved by greater funding on new and emerging technology such as green energy and AI as these investments would also improve the UK’s position internationally.

Bibliography

“Autumn Budget 2025 Document.” UK Government, HM Treasury, 2025, https://www.gov.uk/government/publications/budget-2025-document/budget-2025-html. Accessed 28 Nov. 2025. “Autumn Budget 2025: A Summary.” UK Parliament — House of Commons Library, 26 Nov. 2025, https://commonslibrary.parliament.uk/research-briefings/autumn-budget-2025-a-summary/. Accessed 28 Nov. 2025. “Autumn Budget 2025: Initial Response.” Institute for Fiscal Studies, 26 Nov. 2025, https://ifs.org.uk/articles/autumn-budget-2025-initial-response. Accessed 28 Nov. 2025. “The 2025 UK Budget: Live Coverage.” BBC News, 26 Nov. 2025, https://www.bbc.com/news/live/cy8vz032qgpt. Accessed 28 Nov. 2025. Wheeler, Nigel. “UK Autumn Budget 2025: Public Reaction and Criticism.” BBC News, 27 Nov. 2025, https://www.bbc.com/news/articles/cgmn991pz9jo. Accessed 28 Nov. 2025.

Mason, Edward. “View: Sterling, UK Bond Prices Rise as Reeves Budget Delivers More Headroom.” Reuters, 26 Nov. 2025, https://www.reuters.com/business/finance/view-sterling-uk-bond-prices-rise-reeves-budget-delivers-more-headroom-202 5-11-26/. Accessed 28 Nov. 2025. “How Have Britons Reacted to the 2025 Budget?” YouGov, 27 Nov. 2025, https://yougov.co.uk/politics/articles/53583-how-have-britons-reacted-to-the-2025-budget. Accessed 28 Nov. 2025.