Expert comment on The Budget

The budget today confirms a government focused on stability rather than sweeping reform. Income tax and National Insurance thresholds will remain frozen for an extra three years beyond 2028—a quiet but significant extension that increases fiscal drag and raises billions without headline tax hikes. Similarly, ISA allowances will be reshaped: from April 2027, under-65s can put only £12,000 into cash ISAs, with the remainder reserved for investments. These measures signal a preference for incremental adjustments over structural change.

Some of the redistributive steps stand out. Scrapping the two-child benefit cap from April 2026 marks a major social policy shift. Apprenticeship training for under-25s will be free for SMEs, and modest education investments suggest a nod to long-term human capital, though there is some continuation of existing aspects here, and the levy on international students is not likely to encourage skills development holistically.

Property taxation takes a new turn with the ‘mansion tax’: homes worth over £2m will pay £2,500 annually, rising to £7,500 for properties above £5m. Pension salary sacrifice schemes will be capped from 2029, limiting contributions above £2,000. Gambling firms face a sharp rise in remote gaming duty—from 21% to 40%—these moves are likely to spark pushback.

On sustainability, the introduction of an electric vehicle excise duty (3p per mile for EVs, 1.5p for hybrids) broadens the tax base but risks dampening green adoption at a critical juncture. Reforms to the Motability scheme removing luxury vehicles reinforce a focus on fairness, though they may raise accessibility concerns.

The OBR leak—an unusual twist—revealed downgraded productivity growth expectations to 1%, even as chancellor claims to have more than doubled fiscal headroom to £21.7bn. Growth forecasts remain modest, and borrowing will stay elevated, underscoring the Budget’s underlying theme: tactical restraint buys short-term stability, but structural challenges—productivity, housing supply, and sustainability—remain unresolved. This Budget avoids political risk and signals competence, but the question persists: does tactical caution today risk strategic vulnerability tomorrow?

Dr Akash Puranik is a Senior Lecturer in Business and Management.