Budget 2025 Unveiled with Mixed Reactions Amid Economic Challenges
The Budget 2025 announcement includes scrapping the cap on extra benefits for larger families, a move the prime minister frames as beneficial for the economy alongside energy-bill relief and a rail-fare freeze. A child-poverty strategy is also expected later in the week.
Labour backbenchers have shown an improved mood as the policy reinforces a clearer party identity and aids in maintaining discipline among MPs. The Labour leadership believes adopting a calmer stance could unlock business confidence.
However, the economy remains weak with high debt levels, expected sluggish growth through 2030, rising welfare spending, and increasing taxes. Minimum wage increases and business rates are also set to rise. Despite this, markets have not experienced a large meltdown; some business leaders suggest the budget could stabilise the economy and usher in a period of confidence despite the tax hikes.
Public opinion polls reveal that Reeves’s plans are unpopular, with over one million people facing higher income tax or becoming newly liable for it. Inflation exceeds expectations and growth in spending power is poor, which may pose difficulties for Labour in the upcoming local elections in May.
Within Labour, unions and certain left-wing critics oppose a partial U-turn on expanding workers’ rights, specifically the removal of day-one unfair-dismissal protection, creating internal tensions and risking party unity. The party is shifting towards a traditional growth-focused message emphasizing reduced red tape and planning reform while maintaining a commitment to growth. Downing Street defends this growth agenda.
Controversy has emerged over the Office for Budget Responsibility (OBR) figures: Reeves was initially informed of a financial shortfall, but the OBR later indicated there was no such hole. Critics accuse the government of misleading the public, which risks further damage to trust in the administration.
