Strong foundations, secure future: a Budget that delivers on the country's priorities

Rachel Reeves sets out a Budget that delivers on the change promised by the government to cut NHS waiting lists, cut debt and borrowing and cut the cost of living.

• Chancellor doubles down on cutting cost of living and inflation for hard working families across the UK with £150 off energy bills and freezes for rail fares, fuel duty and prescription fees   
• Announces 250 new Neighbourhood Health Centres building on the biggest waiting list drop in 15 years with 5.2 million more appointments  
• Sets out the fair choices taken by the government that will cut our debt and government borrowing to help interest rates keep falling.

The Chancellor today unveiled a Budget that takes the fair choices to deliver on the country's priorities of cutting the cost of living, reducing NHS waiting lists and driving down our borrowing and debt.  

Millions of hardworking families struggling with household costs will benefit from Rachel Reeves' inflation-busting decisions, with decisive action to cut £150 off energy bills, freeze rail fares and a historic move to lift 450,000 children out of poverty.  

Despite a decade of damage and historic underinvestment under the previous government which led to a £16 billion downgrade to productivity, the Chancellor was clear she was determined to defy the forecasts and break Britain out of its cycle of decline through stability, investment and reform.

Chancellor of the Exchequer, Rachel Reeves said:   

I can tell you today that, for every family we are keeping our promise to get energy bills down and cut the cost of living with £150 taken off the average household energy bill from April. 

Money off bills, and in the pockets of working people. That is my choice.

Upgrading the UK's economic growth this year to 1.5% from 1% in the Spring, the government's fiscal watchdog the Office of Budget Responsibility (OBR) said the choices taken in the Budget would reduce inflation to 0.4% next year and cut government  borrowing faster than any other G7 country, meaning more money can be spent on vital public services rather than debt interest. 

It also said the Chancellor would more than double headroom to over £21.7 billion – providing the stability we need for economic growth.

Cutting the cost of living

The choices the government has made have led to wages growing more in the first year of this government than at any point in the 2010s, but the Chancellor was clear too many families are still struggling with the cost of living which is why the Budget includes a range of measures to cut bills and boost pay packets.    

Front and centre of the plans is a move to take £150 off energy bills to lower inflation and ease pressure on family finances. Poorer households will save up to £300 when combined with the Warm Homes Discount.   

In a range of further measures designed to ease the cost of living, commuters will save hundreds of pounds on their season tickets after rail fares were frozen for the first time in 30 years. An extension of the temporary 5p fuel duty cut for an extra 5 months, a further fuel duty freeze, and the new UK wide Fuel Finder scheme will save the average driver £89, and boosted pay-packets will give a £900 rise for full time workers on the National Living Wage and National Minimum wage. Full-time workers on the 18-20 National Minimum Wage rate will see a £1,500 rise.   

Thanks to the government's commitment to the pension triple lock for this parliament, pensioners on the full new state pension will receive an extra £575 a year from April 2026.

Cutting waiting lists and protecting vital public services

The Chancellor was clear the government would not return to austerity by slashing public investment or public services which left waiting lists rising and choked off economic growth.   

Instead, she committed to maintaining the highest levels of public investment for four decades, protecting the record investment in our NHS that has cut waiting lists by over 230,000, the largest fall in 15 years, and delivered an extra 5.2 million appointments in England.    

The Chancellor today stated she will go further, announcing 250 new Neighbourhood Health Centres and expanding more services back into communities so people can get better, faster care locally.   

Reeves was also clear that the government would be relentless in driving out waste so that every penny of public money is spent wisely. She reaffirmed plans to cut the cost of politics, by abolishing Police and Crime Commissioners and 5,000 councillors which together save more than £250 million over five years while continuing the crackdown on Covid fraud is estimated to deliver almost £400 million.

Cutting Debt

Currently, £1 in every £10 the public sector spends now goes on debt interest - four times what we spend on nurses. The Chancellor made clear there was nothing progressive about this and set out plans to cut borrowing and our debt by spending wisely, reforming welfare and making fair choices on tax.  

Her decisions and commitment to her iron clad fiscal rules will mean borrowing will fall in every year, doubling the fiscal headroom to £21.7 billion to secure the public finances.

Driving economic growth

The Chancellor said she was determined to double down on the decisive action to grow the economy and create good jobs, building on the action already taken including increasing public investment by over £120 billion over the Parliament, creating the National Wealth Fund, which has already invested £3.8 billion, backing builders not blockers through the biggest planning reforms in a generation and supporting the expansion of Heathrow and Gatwick airports, plus the construction of Sizewell C.   

She announced she would be supporting high streets with permanently lower tax rates for 750,000 retail and hospitality properties and backing entrepreneurs and fast-growing companies with tax breaks to hire and list in the UK.   

Other measures to boost growth include funding hundreds more planners across England to supercharge the government's commitment to build 1.5 million homes, extending the DLR to Thamesmead, unlocking thousands of new homes and jobs and investing further in the Lower Thames Crossing, building the UK's first Small Modular Reactors at Wylfa on Anglesey, introducing a first-of-its-kind three-year stamp duty holiday for new UK-listed companies, saving firms up to £50 million per year and increasing share prices and reforming ISAs to get more people investing and drive £4 billion of investment into our stock market.

Making the tax system fairer

On tax, the Chancellor set out fair and necessary choices that will deliver on the public's priorities to cut the cost of living, NHS waiting lists and borrowing. She said she would be implementing the major reforms to protect employees pay slips but also cut their energy bills.  

Asking everyone to contribute, the current personal tax thresholds will be frozen from 2028 to 2031, but those with broader shoulders will contribute more through fair reforms previously ducked for too long. Taxes on property, dividend and saving income – which currently face no equivalent of National Insurance – will be increased by 2p, narrowing the tax gap between landlords and tenants, with additional allowances to protect those with small amounts of such income.  

A typical family home in England pays more council tax than a £10 million Westminster mansion, so the Budget also introduces a High Value Council Tax Surcharge on homes worth more than £2 million, while protecting those on low incomes.  

The Budget also set out reforms to well-intentioned tax reliefs which have seen significantly increasing costs that disproportionately benefit the wealthy. From April 2029, the government will charge employee and employer National Insurance on any pension contributions made via salary sacrifice above £2,000 a year and halve capital gains tax relief for bosses selling their businesses to Employee Ownership Trusts from 100% to 50% to retain a strong incentive for employee ownership while ensuring business owners pay their fair share.  

In moves to update the tax system for a modern-day economy the government is introducing a new per mile levy for electric and plug-in hybrid cars, coming in 2028. All cars contribute to wear and tear on our roads, so it is only right that our motoring taxes cover EVs via a modest per mile levy, with extra support to keep EV ownership attractive.  

Responding to the significant growth in online gambling which has boosted revenues while increasing social harms, the government will increase online gambling duties, raising more than £1 billion a year. In-person gambling for horseracing will be protected with the government also scrapping bingo duty to recognise the cultural value these provide for millions across the country.  

Fuel prices are now at their lowest in real terms for a decade. To support motorists, the government is extending the temporary 5p cut to fuel duty for a further five months until the end of August 2026, as well as cancelling the planned inflation increase for 2026-27. After this extension, the fuel duty rate will gradually return to early 2022 levels.

Reforming welfare

With fairness at its heart, the Budget also set out a series of measures to fix a broken welfare system that has left millions written off as too sick to work.   

The historic decision to remove the two-child limit in full from April 2026 will lift 450,000 children out of poverty - the biggest reduction at any Budget this century. Making children poor costs us all in the long run with a child growing up in poverty less likely to work and 25% more likely to be on benefits as an adult.    

The Chancellor also announced reforms to Motability, removing luxury cars from the scheme and saving taxpayers £1.5 billion over five years. The Budget also supports the long-term youth unemployed by offering them a guaranteed job instead of benefits and closes the loophole that allows people living abroad to buy a UK State Pension at a reduced rate.  

The Chancellor was clear the Budget makes fair but necessary choices – but those choices are for a purpose: building a stronger, fairer country, where living standards rise, child poverty falls, and public services are rebuilt in every corner of Britain.