At the end of November 2025, UK Chancellor of the Exchequer Rachel Reeves presented a budget that is positioned as an attempt to combine “restoring public finances” with “investing in social justice.” The budget is seen as one of the most ambitious and controversial documents of recent times, combining a significant increase in the tax burden with limited, albeit important, social reforms, while key financial decisions have been postponed until the future. The official text of the budget and independent calculations paints a picture that explains why tensions have increased among the population and in analytical centers.
The main tool for filling the budget was to freeze income tax and social security contribution thresholds until the 2030-31 tax year. Formally, this is not a “rate increase,” but in essence, it is a hidden tax increase, as inflation and wage growth will cause more people to “fall” into higher tax brackets. Experts warned that the effect would be disproportionately severe for low-income households. It is this decision that will provide the budget with hundreds of billions in revenue for the coming years, but at the same time it will hit the purchasing power of working families.
At the same time, the government has taken a number of significant social measures. The most notable was the announcement of the removal of the two-child benefit cap, a measure that for almost a decade was considered one of the most controversial in the social support system. The removal of the cap means that families with three or more children will once again be eligible for the full amount of child benefits, which is estimated to cost the budget billions of pounds annually. However, for the government, this step was not just a financial decision, but a symbolic gesture, an acknowledgment that the previous policy had disproportionately affected large families and had become one of the key factors in the growth of poverty among such families. In doing so, the cabinet is attempting to demonstrate its willingness to review the harshest elements of the “austerity era” and return social policy to the principle of targeted but fair support for those most vulnerable in the ongoing cost-of-living crisis. Chancellor Rachel Reeves argued that these measures are an investment in the future and a way to support working families. Critics, on the other hand, believe that this is a politically expedient move that masks the overall burden. Reuters reported that the package of measures as a whole increases taxes by around £26 billion, while removing the cap on payments will cost around £3 billion a year, highlighting the political cost of the decision.
Independent assessments paint a cautiously optimistic picture. The Institute for Fiscal Studies points out that the combination of “freezing thresholds” and selective taxes is more likely to increase the burden on low and middle incomes than on the top quintiles, while fiscal policy is partially “deferred” as major adjustments are expected to be made later, closer to the parliamentary elections, creating the risk of “political turmoil” and accusations of postponing real fiscal responsibility. The Resolution Foundation notes that the proposed budget is indeed capable of alleviating some of the current pressure on households in the short term, mainly through selective social concessions and a moderate increase in funding for vital social services. However, analysts emphasize that this temporary relief does not address the fundamental imbalances in public finances. Most of the “fiscal repair work,” i.e., key decisions on deficit reduction, expenditure restructuring, and possible further tax increases, has effectively been postponed until the end of the parliamentary term. This approach allows the government to minimize political costs now, but at the same time increases the risk that by the middle or end of the five-year cycle, the country will face the need to take more drastic and unpopular measures to keep public debt under control and comply with its own fiscal rules.
For the health and social care sector, the budget is a combination of promises and constraints. The independent think tank King’s Fund acknowledged the importance of additional funding but pointed out that the real needs of the National Health Service and social care have grown due to demographic pressures and a staffing crisis. The resources allocated, although significant compared to previous cycles, are unlikely to ensure a sustainable recovery in the quality and accessibility of services without more profound reforms in the structure of the NHS and staffing policy. In other words, there is money, but not enough systemic change.
What does this mean for society and politics? First, it is ordinary working people who will feel the lasting effects. Increasing the tax burden by freezing thresholds will reduce real income growth and increase discontent, especially if inflation returns or wages fail to keep pace with rising prices. Second, the government’s steps in the social sphere (abolishing the limit on child benefits, targeted funding for healthcare) will reduce the severity of some humanitarian problems but will not solve the structural causes of poverty and the shortage of services. Finally, there is considerable political risk, as the combination of “pay more now” processes and promises that are being postponed creates a breeding ground for protests, strikes, and sharp opposition rhetoric. Criticism is already being voiced in the press and among trade unions, while businesses are expressing disappointment at the lack of incentives for growth.
It is predicted that in the short and medium term (1-3 years), the tax component will increase budget revenues and create a buffer for the government to finance the National Health Service and social programs. However, this effect is offset by long-term commitments and the risk of a decline in household consumption. If the economy does not accelerate and markets begin to demand risk premiums, the government will either have to tighten fiscal discipline (which will hit the social sector) or raise taxes again, which seems a politically dangerous option. According to analysts, the “stabilization followed by moderate adjustment” scenario is the most likely, but the probability of “political turbulence” (waves of protests, strengthening of the opposition, local budget crises in municipalities) remains significant.
Ultimately, the 2025 budget is the product of political compromise. The government is trying to demonstrate its concern for the most vulnerable (by removing the two-child benefit cap), while at the same time resorting to measures that require concessions from the majority of taxpayers (freezing thresholds). This approach may be seen as an optimal distribution of obligations, but it may also widen the gap between the expected level of social services and the real possibilities for financing them. For society, this means that the country is approaching a point where the old model of “supporting social services without raising taxes” no longer works. Either the economy will start to grow significantly faster, enough to offset hidden tax increases and provide additional revenue without further pressure on households, or society will inevitably have to make a difficult choice between agreeing to even higher taxes or accepting cuts to promised social services, including healthcare, social support, and local development programs.
This choice is not limited to economics; it directly affects the political dynamics in the country. The nature of all future political struggles will depend on which strategy voters support and what decisions the government dares to make. Will populist forces demanding immediate spending grow stronger? whether the demand for strict fiscal discipline will strengthen; or whether a coalition will form in favor of long-term investment, despite short-term costs. It is this fork in the road, rather than individual budget measures, that will determine the political landscape in the UK in the coming years, from the structure of party competition and trust in institutions to social stability and the state’s ability to perform its basic functions.