Autumn Budget 2025: Initial Response - Reeves comes out fighting after OBR leak
Professor Joe Nellis November 26th 2025
This was a confident and bullish Budget from the Chancellor, aimed at satisfying Labour backbenchers, prioritising long-term investment, and reassuring the financial markets.
Bond yields rose slightly following the leaking of the OBR’s forecasts, but calmed throughout the Chancellor’s speech. In her raft of investment announcements, the Chancellor hasn’t chased short-term, instantaneous boosts to the economy, instead focusing on longer-term initiatives regarding infrastructure and transport.
So far, so good. The financial markets appear content. An increase in tax revenues by has given the Chancellor a more comfortable fiscal headroom of £20bn. However, the OBR and Treasury disagree in their forecasts for the public finances.
According to the OBR, annual borrowing is set to fall from 4.5% of GDP this year to under 2% by 2030. However, the OBR projects national debt as a share of GDP to rise from 95% this year to 96% in 2030 — this would mean the Chancellor does not meet one of her fiscal rules. The Chancellor seems to disagree, announcing that this share will be falling by 2030. Who are we (and the markets) meant to believe?
This has been termed a ‘cost-of-living’ Budget — those with ‘the broadest shoulders’ are certainly bearing the brunt. The surcharge on properties valued at more than £2mn, a two-percentage point tax increase on dividends, and restrictions to salary sacrifices in pensions will hit higher earners.
"Lifting the two-child benefit cap is a crucial intervention in the fight against child poverty and will be welcomed by her backbenchers, as will the £150 cut in average annual household energy bills from 2026."
Yet, has the Budget actually helped put money in people’s pockets in the short-term? Not really. The continued freeze on income tax and National Insurance thresholds, extended until 2030/2031, will drag many more earners into paying higher rates of tax. The above-inflation increase in the minimum wage is good for low-paid workers who happen to be in work, but this may disincentivise hiring at a time of high youth unemployment and economic inactivity.
With inflation falling but remaining high, the Chancellor was cautious not to reignite any inflationary pressures — freezing fuel duty (for now) and rail fares, as well as providing energy bill relief. While the rise in minimum wage in the absence of productivity improvements may have some inflationary effects, we can still expect the Bank of England to cut interest rates when the Monetary Policy Committee meets on 18th December.
It is clear that this is not a Budget to provide an instant boost to economic growth. The OBR has upgraded growth this year from 1% to 1.5%, and the Chancellor expects the economy to grow at an average of 1.5% a year across the lifetime of this Parliament, despite the OBR’s downgrading of productivity improvement from 1.3% to 1% a year. These projections would see the UK grow modestly compared to long-term trends — and could always be knocked off track by unforeseen events and external shocks. The margin of error is small.
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