A Budget of Broken Promises
Chancellor Rachel Reeves has presented a budget that directly contradicts multiple pledges made to voters before the general election. On Wednesday 26 November 2025, she announced tax increases totalling £26 billion, adding to the £40 billion rise from her first budget. This marks a significant departure from repeated assurances that Labour would not increase taxes on working people.
The Specific Tax Measures
The central broken promise involves the extension of the tax threshold freeze, a policy previously criticised by Labour for hurting working people. This move, extended for three years, will drag 800,000 workers into paying tax and push another one million into the higher tax band, raising £8.3 billion. The Office for Budget Responsibility now predicts that by the end of this parliament, one in four people will be caught by the 40% higher rate of tax.
Further U-turns include the reversal on welfare reform. The government has performed a U-turn on the winter fuel allowance and disability benefits at a cost of £6.6 billion. In a surprising move, Ms Reeves also lifted the two-child benefit cap, costing £3 billion, despite Prime Minister Keir Starmer explicitly omitting this from the manifesto as part of the "hard choices" the government would make.
Political Strategy and Consequences
This budget appears designed for two key audiences: the financial markets and the Labour Party itself. The substantial tax rises help the chancellor meet her fiscal rules, requiring the day-to-day spending budget to be in surplus by 2029-30. Her fiscal headroom has increased from a vulnerable £9.9 billion to a more robust £22 billion, a move likely to please investors and potentially reduce Britain's borrowing costs.
For the Labour Party, the budget seems aimed at quelling internal dissent. With a mutinous group of MPs and talk of leadership challenges, these tax-funded spending commitments have pleased backbenchers. One cabinet minister described it as "a budget for self-preservation, not for the country." Despite commanding a massive majority of 400 MPs, the Prime Minister and Chancellor find themselves governing from a defensive position, focused on survival rather than implementing a bold agenda.
When questioned about breaking manifesto promises, Rachel Reeves argued the pledge specifically involved rates of income tax, a technical distinction the Institute for Fiscal Studies has disputed. This approach to accountability, combined with what critics call a "spend-now-pay-later" budget structure with tax rises scheduled just a year before the next election, raises serious questions about the government's long-term credibility. While this budget may buy the administration more time, the trust of voters, particularly the middle and higher earners who will bear the brunt of these tax increases, may prove impossible to recover.
