Katie Williams
The Autumn Budget will take place on 26 November, and speculation is mounting over what measures will be taken to rebalance the public finances.
Many are concerned that tax rises could be on the cards when chancellor Rachel Reeves addresses parliament.
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For example, last year’s event saw a 6.7% increase to the minimum wage, as well as £40 billion worth of tax rises to balance the books and fund public services. This included the much-disliked National Insurance hike for employers.
This year’s Budget date is much later than usual, with Budgets typically taking place in late October or early November.
What is the Budget?
The Budget is an opportunity for the chancellor to set out the government’s plans for spending, taxation, and the economy.
It typically takes place once a year, but previous chancellors have sometimes deviated from this schedule with two events. Reeves has committed to returning to just one annual Budget.
As well as announcing tax and spending policies, a key role for the chancellor is balancing the books at each Budget. Reeves’s fiscal rules prevent her from borrowing money to pay for day-to-day spending, and require her to have debt falling as a share of the economy by 2030.
Despite criticism that the self-imposed fiscal rules restrain the chancellor too much, Reeves reaffirmed on 3 September that they remain “non-negotiable”.
When chancellors set the Budget, they give themselves some financial leeway – a sort of margin for error known as ‘fiscal headroom’. This is essentially the amount by which they can increase spending or cut taxes without breaking their fiscal rules.
Earlier this year in the spring, Reeves had a fiscal buffer of £9.9 billion, but analysts believe this has now morphed into a black hole due to weak economic growth, high borrowing costs and failed spending cuts. This means further tax rises look likely this autumn.
Economic forecasts are also published at each fiscal event, giving a sense of what we can expect over the next five years. One of Reeves’s main missions is to deliver growth, so she will be judged against this objective.
Who is responsible for the Budget?
As chancellor, Reeves has ultimate responsibility for the Budget and announces the main measures in a speech before parliament.
Other ministers that have a say over the Budget include Reeves’s second-in-charge, the chief secretary to the Treasury. This is now James Murray, but had been Darren Jones until he moved to the Prime Minister’s office on 1 September.
Pensions Minister Torsten Bell, who was the director of the Resolution Foundation think tank before becoming an MP, is also understood to be taking a key role in this year’s budget.
The rest of the Treasury is also closely involved in the process and publishes a report alongside each Budget statement, providing further detail on the rationale and costing behind each measure.
The Office for Budget Responsibility (OBR), the UK’s fiscal watchdog, plays a role too, as the chancellor’s Budget decisions are partly informed by data and analysis provided by them. The OBR publishes its economic and fiscal outlook on the same day as the Budget is delivered.
After the Budget statement, MPs may be required to approve immediate changes to some taxes, such as alcohol and tobacco duties. A four-day Commons debate usually follows, after which MPs are asked to agree ‘ways and means’ resolutions to approve further tax proposals.
The last step is the Finance Bill, which gives permanent legal power to the measures introduced in the Budget. The Finance Bill often acts as a motion of confidence in the government – if it cannot pass key measures in the bill, it could be at risk of collapse.
What happens on Budget day?
The Budget will take place on Wednesday 26 November, with the chancellor delivering her statement at around 12.30pm, after Prime Minister’s Questions.
The shadow chancellor – currently Conservative MP Mel Stride – follows afterwards with his response to the policies announced.
Another key moment on Budget day is the photo opportunity before the statement to parliament. The chancellor famously poses in front of 11 Downing Street with the little red box.
What to expect from the 2025 Autumn Budget
The economic outlook for the UK has been weak for some years now, and has not significantly improved since the pandemic.
The economy suffers from slow growth (as measured by GDP), low productivity, and high inflation, unemployment, and borrowing costs.
These factors mean the chancellor has much less money to spend on public services, new projects, or to finance tax cuts.
In all, the Institute for Fiscal Studies (IFS), a think tank, estimates that Reeves will need to find £22 billion to simply maintain existing fiscal policy and keep the £10 billion of fiscal headroom she left herself in March, let alone to finance extra expenditure.
The money needed to balance the books will have to be found by either raising taxes, cutting government spending, or borrowing more money.
But, as the chancellor’s self-imposed fiscal rules greatly limit her ability to raise more money through borrowing, and spending cuts (like those planned for welfare and the Winter Fuel Payment) have proved difficult to push through, the chances are that taxes will need to increase.
There are a number of ways that she could do this, such as the rumoured reform of property tax.
For more information about the taxes that could be raised at the Budget, read our article on ‘Will taxes rise further in the 2025 Autumn Budget?’.
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