Labour's 2025 Budget: Focus on Cost of Living, Child Poverty, and Economic Stability Amidst Political Challenges
Labour's 2025 Budget, presented by Reeves, focuses on addressing three primary issues: reducing the cost of living, cutting NHS waiting lists, and lowering government debt as a share of national income, funded through tax rises elsewhere. The tax approach avoids increasing income tax broadly, instead freezing some rail fares for particular groups to ease living costs.
This Budget removes the cap on extra benefits for larger families and includes a long-awaited child-poverty strategy due later in the week, framed as a redistribution of taxpayers' money to the least well-off and a reaffirmation of Labour values to unite backbenchers. Welfare spending is rising alongside increases in the minimum wage and business rates. Reeves increased her public involvement ahead of the Budget amid unusually intense pre-budget briefing and leaks.
Despite efforts to stabilize the party's standing, the Budget has faced significant scrutiny. Labour backbench unrest and talks of mutiny have arisen, with some MPs fearing leadership challenges and debating whether annual Budgets should be scrapped. A partial U-turn on expanding workers' rights, such as removing day-one unfair dismissal protection, angered some on the left and unions, risking strain within Labour leadership and Parliament.
Opposition includes potential protests from groups like farmers over inheritance tax policies. Post-Budget polls indicate Reeves's plans are not popular, with over a million people projected to pay more income tax or start paying it. The Office for Budget Responsibility had earlier signaled no hole in the finances; Conservatives accused Reeves of lying, a claim denied by Downing Street, potentially harming trust in government.
Markets remained relatively steady, but debt levels are high, and economic growth is forecast to remain sluggish through 2030. The best-case scenario envisions Budget stability sparking economic improvement and strengthening Labour's message ahead of May elections. Conversely, the worst-case sees slow growth persisting, with higher taxes and minimum wage increases possibly dampening hiring and further eroding public trust.
