Labour’s 'mega-budget' finds the 'magic money tree', and lays out the direction for the next five years, finally. But can it truly rebuild Britain?

Every budget is a risk. Many in Labour are still traumatised by a decade in which the party’s economic credibility was destroyed in the eyes of the public, and are aware that the public’s tolerance of their ability to manage an economy hangs by a thin thread.

The level of pre-briefing and leaking showed a level of paranoia about how markets might react. It goes without saying that a new government that ran on a platform primarily of a return to economic stability announcing a budget which spooked markets would be cataclysmic.

And so, in the first Budget by a Labour government in a generation, Chancellor Rachel Reeves carried the famous metaphorical “ming vase” across a tightrope designed to bring government day to day spending under control and provide capital for long term investment through increased borrowing.

The central bet of this budget is that, as difficult as the decisions being taken today are, as long as people’s pay slips don’t change as an immediate result of the measures, the Government will have kept its promise in the eyes of voters.

The second-order calculation underlying this approach is that “business can handle” an increased tax and regulatory burden, as long as they can rely on a government which is stable overall. Headline tax raising measures fall almost entirely on businesses and employers.

Despite the doom and gloom of the messaging of the last sixteen weeks, Labour’s fiscal policy places large bets on growth and investment. Under the new Public Sector Net Debt Fiscal Rules, Reeves has found a huge amount of money behind the back of the sofa, including:

HOMES -  Over £5bn overall was pledged for housing in 2025-26, with a commitment of £3.1bn for its Affordable Homes programme alongside £500m for small housing developers. The Government also intends to hire “hundreds” of planning officers as part of their reform of the planning process, and earmarked £1bn to tackle dangerous cladding. The Right to Buy discount will be reduced, and Local Authorities will now be able to retain full receipts of social housing sales to help maintain and expand their housing stocks. 

HIGH STREETS & TRANSPORT - Business rates, expected to sharply increase in April, will be permanently lowered for leisure, retail, and hospitality businesses. Business Rates relief of 40%, to a maximum of £110,000, and frozen Business Rates will be a boon for small businesses, who have been particularly concerned with increased costs from strengthened workers' rights and a rise in the national minimum wage. The Chancellor also confirmed that HS2 will now stop at Euston, not Old Oak Common, as well is investing in the next stages of East West Rail.

(SOME) TAX CUTS – Fuel duty is to be frozen for another year and unsurprisingly. there was no rise in National Insurance or VAT. However more surprisingly, the Chancellor announced two effective tax cuts over the course of the parliamentary term: Income Tax thresholds will be unfrozen in 2028, seen as one “rabbit out of the hat”, and a 1.7% reduction in the Draught Levy bringing cheers to the gallery. At the same time, £40bn of taxes are to be raised through a combination of tax increases, including raising employer’s National Insurance contributions, Capital Gains Tax, Stamp Duty on second homes, and the Energy Profits Levy.

This is only a snapshot of a wide sweep of investment promises and tax commitments made in this afternoon’s momentous Budget. If you’d like to understand more about how your organisation may be impacted, contact us via tomorrow@lowickgroup.com.

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