15 thoughts on the UK Budget

 The sources provide specific details on the OBR Assessment Leak Disaster, framing it as an "utter disaster" that occurred just hours before Chancellor Rachel Reeves delivered the November '25 UK Budget.

1. The OBR Assessment Leak Disaster

The OBR leak involved the Office for Budget Responsibility putting out its full assessment and forecast hours before the Budget. The author of the analysis referred to this incident as an "utter disaster" and "All rather unedifying," although they assumed it was a "Cock-up rather than conspiracy".

The main consequence of the early release was that anyone who caught it early could have "made a fortune trading on the information".

In the context of fiscal policy, a commenter noted that the OBR is an institution that is "supposed to anchor fiscal credibility". Therefore, having the numbers released hours early was "embarassing" and "undermines the whole process".

The Leak within the Context of the Nov '25 UK Budget Analysis (Reeves)

The OBR assessment and forecast are critical components of any analysis of the UK Budget, including the November '25 offering by Rachel Reeves. The sources use the OBR's data and analysis extensively to critique and explain the government's fiscal choices.

The leak thus compromised the public rollout of information that was central to understanding the economic backdrop and the policies announced. The OBR’s assessment, whether leaked or officially presented, provided the foundational data for key aspects of the budget analysis, including:

• Fiscal Strategy: OBR data showed that the overall impact of the government's three fiscal events, including the Nov '25 Budget, pointed to a clear story of higher taxes, more extra spending than those taxes raised, and extra borrowing. The OBR provided the data illustrating that this specific budget skewed more tax-heavy and helped the Chancellor build a thicker fiscal buffer.
• Borrowing and Fiscal Rules: The OBR produced a chart illustrating the "quite entertaining" front-loading of borrowing, showing "£20bn in extra borrowing" over three years, before tax rises intervene just in time to ensure compliance with fiscal rules by the end of the forecast period (2029-30). This dynamic of Chancellors fiddling with the last year to ensure compliance is a long-standing practice.
• Macroeconomic Forecasts: The OBR issued a downgrade in growth expectations, noting that it remains among the more optimistic forecasters. The OBR’s macroeconomic forecast changes also paradoxically helped the Chancellor, as higher expected inflation and wage growth pushed more income into frozen tax brackets, a dynamic the OBR referred to as more "tax rich" nominal growth (fiscal drag).
• Expansion of the State: The OBR provided data showing how the state has expanded under the government, with public spending rising to 44-45% of GDP, up from an average of 41.6% over the previous decade.
• Future Challenges: The OBR "helpfully called out a few of the most potent fiscal landmines" affecting the British state, specifically citing the costs of asylum and special-needs schooling.

In short, while the leak itself was viewed as a failure of institutional control and an "embarassing" incident that undermined the OBR’s credibility, the content of the OBR's full assessment was essential for providing rigorous analysis of the budget’s impact, revealing details on fiscal drag, front-loaded borrowing, and revised growth expectations.

To understand the situation, one can think of the OBR as the architect providing the blueprints (the assessment and forecast) for the financial structure (the Budget). The leak meant the blueprints were publicly available hours before the official presentation ceremony. Although the premature release was a massive security failure that affected market credibility, the details within those blueprints remained the essential basis for understanding and analyzing the structure's eventual form and flaws.

The sources analyze the "Overall Fiscal Story" of the Labour government by aggregating the effects of its policies across three major fiscal events: October '24, March '25 (described as a "messy fudge"), and the November '25 UK Budget (Reeves Round II).

This aggregated data provides a clear picture of the government's total fiscal approach.

The Overall Fiscal Story: Labour’s Total Impact

When adding up the consequences of all three fiscal events, the sources conclude that the total story is defined by a significant increase in the size of the state, achieved through a combination of increased taxation, expenditure, and borrowing.

The total projected impact of new policies by the end of the parliament (Financial Year 2029/30) is "pretty vast" and includes:

1. Higher Taxes: Approximately £79 billion in extra tax receipts (equivalent to 2.2% of GDP).
2. Higher Spending: Approximately £96 billion in extra spending (equivalent to 2.7% of GDP).
3. Extra Borrowing: Approximately £17 billion in extra borrowing (equivalent to 0.5% of GDP).

Crucially, the aggregate figures show that the government has enacted "more in extra spending than those higher taxes raised," necessitating the extra borrowing to cover the difference.

Context of the Nov '25 UK Budget (Reeves)

The November '25 Budget, delivered by Chancellor Rachel Reeves, primarily served to reinforce this existing fiscal trajectory.

While the earlier events contributed heavily to the overall borrowing and spending increases, the Nov '25 Budget specificially "skewed more tax-heavy". This specific mix allowed the Chancellor to "slightly narrow end-of-parliament borrowing" and concurrently "build up a thicker fiscal buffer".

Despite the government being "often criticised for doing too little," the cumulative totals represent "Big moves".

Expansion of the State and Associated Critique

The most significant consequence of Labour's cumulative fiscal choices is the expansion of the state.

• On average, state spending in the previous decade was 41.6% of GDP.
• Following these three budgets, public spending has risen to 44–45% of GDP, which accounts for both the increased operational spending and a higher debt interest bill. The sources show this rise as an "appreciable shift".

The analysis of this "bigger state" leads to a key philosophical challenge: "what that boost to spending is achieving". The government is viewed as "betting big" that the tens of billions in extra spending, particularly for the NHS, will be effective, and that workers and firms can tolerate "ever-higher taxes," while markets will support this "big fiscal expansion".

However, the sources articulate a concern that this sizeable increase in state spending (almost £100 billion extra per year) has, "so far, without much to show for it". The government had "few concrete improvement[s] in public services" to point to, aside from a minor decline in NHS waiting lists. The author suggests that this disparity—a "sizeable boost in state spending and little improvement in state outcomes"—is a "disjunct" that the government must eventually provide a better answer for.

This means the overall fiscal story is one of high ambition and high cost, where the policies represent major fiscal risks that depend on "equally ambitious reforms to the tax system, to public-service provision, to the planning system and more" to succeed, areas where the budget was deemed "alarmingly light".

The sources highlight the Fiscal Front-Loading Strategy as a key characteristic of the November '25 UK Budget (Reeves), describing it as a familiar political maneuver designed to manage short-term spending and long-term fiscal compliance.

The Fiscal Front-Loading Strategy

The "front-load" refers to the government's approach of increasing borrowing and spending in the early years of the forecast period, with tax rises or spending cuts only materializing at the end of the period to meet mandated fiscal targets.

The source refers to this pattern as "Quite the front-load" and includes a chart from the OBR (Office for Budget Responsibility) that illustrates this dynamic.

Key details of the strategy:

• Borrowing Spike: The OBR chart showed a "quite entertaining" surge of "£20bn in extra borrowing" over the next three years (specifically in the 2027-28 Financial Year).
• Tax Delay: Tax rises are scheduled to "swing in just in time" to rescue the Budget's compliance with fiscal rules by the end of the forecast period, which is the Financial Year 2029-30.
• Short-Term Focus: The budget overall "leans lighter on tax and more on spending" over most of the next five years.

The author explicitly states that this approach echoes the "fiscal fictions" with which the current Labour government had "so vigorously criticised the last few Tory budgets," confirming that the "eternal temptation to kick the can down the road and borrow more in the short run" is hard for Chancellors to resist.

Context within the Analysis of the Nov '25 UK Budget (Reeves)

The front-loading strategy is directly linked to the requirement for the Chancellor to comply with the government's own fiscal rules by the final year of the forecast period (2029-30).

1. Fiscal Compliance: Chancellor Reeves, in her Budget speech, boasted that borrowing would "fall as a share of GDP in every forecast," a definition that the source notes is "rather entertaining" given the front-loading shown by the OBR. This compliance is achieved by fiddling with the last year of the forecast, a practice common to Chancellors.
2. Market Awareness: The reliance on front-loading reinforces the disconnect between long-term claims and short-term reality. The sources note that people involved in gilt trading (government bond markets) pay "far more attention to new issuance over the next few years than any tenuous claims about what the government will do in five years’ time". This suggests that market participants see through the front-loading tactic.
3. Fiscal Horizon: The sources credit the Chancellor with "gradually moving towards a three-year fiscal horizon". This change in emphasis, although subtle, could potentially help mitigate the front-loading dynamic by reducing the emphasis placed on the distant final year for compliance. However, for now, the Chancellor is "happily capitalising on the room for fudge that the fiscal rules leave".

In essence, the Fiscal Front-Loading Strategy reveals that while the overall goal of the Nov '25 Budget was to skew "more tax-heavy" and build a "thicker fiscal buffer" compared to previous budgets, the methodology used to achieve compliance still relied on delaying the pain (tax rises) until the end of the forecast period while increasing spending and borrowing immediately.

The front-loading strategy is like a student who has a massive term paper due: they spend the first few weeks enjoying themselves (extra spending/borrowing) but promise that they will cram and pull an all-nighter (tax rises) right before the final deadline to ensure they pass the course (fiscal compliance).

The sources dedicate a specific section to the "Bond Vigilantes' Verdict" regarding Chancellor Rachel Reeves' November '25 UK Budget, emphasizing the market reaction in the larger context of modern British fiscal events.

The Bond Vigilantes' Verdict

The term "Bond Vigilantes" refers to participants in the gilt market (government bond traders) whose reaction to fiscal policy is crucial. The sources note that every fiscal event in Britain is now conducted with "half an eye on the same-day reaction of the gilt market," a situation described as a "pretty remarkable cross-party failure".

In the case of the November '25 Budget, the verdict from the bond vigilantes was "merciful". This favorable reaction was observed "at least relative to the rather-glum expectations that had already been priced in".

Specific market outcomes included:

• Gilt Yields: Gilt yields were "down marginally".
• US Comparison: Gilt yields were "actually down especially relative to the US".
• Comparison to Previous Budgets: The overall market reaction was "a much more reassuring market reaction than the last budget".

A key factor contributing to this merciful verdict was the Chancellor's action to "buy" a wider headroom margin. As established in the overall fiscal story, the Nov '25 Budget "skewed more tax-heavy," allowing Reeves to "build up a thicker fiscal buffer". This buffer should help "prevent any more messy corrective fiscal events like the one in March".

The Role of Bond Vigilantes in Fiscal Policy

The analysis expands beyond the immediate market reaction to discuss the role of bond vigilantes in the democratic process:

• Political Criticism: The sources acknowledge that it has become "increasingly popular" to criticize the importance of the bond market reaction, calling it a "democratic problem".
• Fiscal Accountability: The author offers two thoughts in response. First, having to pay attention to whether people are willing to lend the government money is a "straightforward consequence" of the policy choice to "run big deficits".
• A "Good Thing": Second, the author posits that bond vigilantes are "essentially a good thing". They act as a mechanism that "prices in the consequences of running unsustainable fiscal policy now, rather than when it’s too late to fix". This mechanism counteracts the political and voter temptation to "spend now" without considering the ultimate consequences.

Context within the Analysis of the Nov '25 UK Budget (Reeves)

While the Nov '25 Budget was viewed positively by the markets, the broader analysis confirms that the Chancellor's fiscal strategy is still built on complex maneuvering that involves short-term borrowing.

Although the Chancellor is "happily capitalising on the room for fudge that the fiscal rules leave" by front-loading borrowing, the bond vigilantes are generally "far more attention" to the new issuance over the next few years than to "any tenuous claims about what the government will do in five years’ time".

Therefore, the merciful verdict implies that the market accepted the government's short-term borrowing needs because the "thicker fiscal buffer" bought by the tax-heavy nature of the Nov '25 Budget provided sufficient reassurance that the government had a viable (if back-loaded) plan for repayment and compliance.

In summary, the bond vigilantes' reaction is the financial market's vote of confidence (or lack thereof) in the government's solvency. In the case of the Nov '25 Budget, the market, despite its general distrust of long-term fiscal projections, gave a "merciful" verdict because the Chancellor used the budget to increase her safety margin against future financial crises, demonstrating a more cautious approach than previous fiscal events.

The sources dedicate a specific section to the "Bond Vigilantes' Verdict" regarding Chancellor Rachel Reeves' November '25 UK Budget, emphasizing the market reaction in the larger context of modern British fiscal events.

The Bond Vigilantes' Verdict

The term "Bond Vigilantes" refers to participants in the gilt market (government bond traders) whose reaction to fiscal policy is crucial. The sources note that every fiscal event in Britain is now conducted with "half an eye on the same-day reaction of the gilt market," a situation described as a "pretty remarkable cross-party failure".

In the case of the November '25 Budget, the verdict from the bond vigilantes was "merciful". This favorable reaction was observed "at least relative to the rather-glum expectations that had already been priced in".

Specific market outcomes included:

• Gilt Yields: Gilt yields were "down marginally".
• US Comparison: Gilt yields were "actually down especially relative to the US".
• Comparison to Previous Budgets: The overall market reaction was "a much more reassuring market reaction than the last budget".

A key factor contributing to this merciful verdict was the Chancellor's action to "buy" a wider headroom margin. As established in the overall fiscal story, the Nov '25 Budget "skewed more tax-heavy," allowing Reeves to "build up a thicker fiscal buffer". This buffer should help "prevent any more messy corrective fiscal events like the one in March".

The Role of Bond Vigilantes in Fiscal Policy

The analysis expands beyond the immediate market reaction to discuss the role of bond vigilantes in the democratic process:

• Political Criticism: The sources acknowledge that it has become "increasingly popular" to criticize the importance of the bond market reaction, calling it a "democratic problem".
• Fiscal Accountability: The author offers two thoughts in response. First, having to pay attention to whether people are willing to lend the government money is a "straightforward consequence" of the policy choice to "run big deficits".
• A "Good Thing": Second, the author posits that bond vigilantes are "essentially a good thing". They act as a mechanism that "prices in the consequences of running unsustainable fiscal policy now, rather than when it’s too late to fix". This mechanism counteracts the political and voter temptation to "spend now" without considering the ultimate consequences.

Context within the Analysis of the Nov '25 UK Budget (Reeves)

While the Nov '25 Budget was viewed positively by the markets, the broader analysis confirms that the Chancellor's fiscal strategy is still built on complex maneuvering that involves short-term borrowing.

Although the Chancellor is "happily capitalising on the room for fudge that the fiscal rules leave" by front-loading borrowing, the bond vigilantes are generally "far more attention" to the new issuance over the next few years than to "any tenuous claims about what the government will do in five years’ time".

Therefore, the merciful verdict implies that the market accepted the government's short-term borrowing needs because the "thicker fiscal buffer" bought by the tax-heavy nature of the Nov '25 Budget provided sufficient reassurance that the government had a viable (if back-loaded) plan for repayment and compliance.

In summary, the bond vigilantes' reaction is the financial market's vote of confidence (or lack thereof) in the government's solvency. In the case of the Nov '25 Budget, the market, despite its general distrust of long-term fiscal projections, gave a "merciful" verdict because the Chancellor used the budget to increase her safety margin against future financial crises, demonstrating a more cautious approach than previous fiscal events.

The sources strongly emphasize the "Lack of Visible Outcomes" as a major criticism and central challenge arising from the government's substantial fiscal expansion, placing this problem squarely within the analysis of the November '25 UK Budget (Reeves).

Lack of Visible Outcomes Despite Increased Spending

The government's overall fiscal strategy, reinforced by the Nov '25 Budget, is defined by an "Expansion of the State". The cumulative impact of Labour's fiscal choices across three events involves approximately £96 billion in extra spending by the end of the parliament.

However, the sources articulate a significant "disjunct" between this massive input of funds and the resulting output:

• The Critique: The section discussing the "bigger state" is immediately followed by a section titled "… but so far, without much to show for it".
• The Evidence: The Chancellor, Rachel Reeves, had "few concrete improvement[s] in public services" to highlight in the Nov '25 Budget. The only minor positive change noted was a "small decline in NHS waiting lists".
• The Scale: The author stresses the magnitude of the problem, noting that pushing "almost £100bn a year extra in state spending ought to show up, somewhere".
• Systematic Tracking: Furthermore, reference is made to a "systematic tracker" run by colleagues at The Economist, which uses quantitative measures voters care about (such as small-boat arrivals and A&E wait times). This tracker concluded that "there has been no perceptible improvement so far this parliament".

Context within the Nov '25 UK Budget Analysis

The lack of visible outcomes transforms the overall analysis of the Nov '25 Budget from a purely financial assessment into a philosophical and political challenge for the government:

1. The Government's "Big Bet": The government is described as "betting big" that the "tens of billions in extra NHS spending" will make a difference. The lack of immediate outcomes implies this bet is not yet paying off.
2. Need for Reform: The sources argue that this substantial increase in state spending (public spending rising to 44–45% of GDP from 41.6% previously) can only succeed if it is accompanied by "equally ambitious reforms" to public-service provision, the tax system, and the planning system. Critically, the Nov '25 Budget was found to be "alarmingly light" on such meaningful, growth-boosting reform.
3. The Time Factor: While acknowledging the counter-argument that "delivering visible change takes time," the author suggests that the sheer size of the spending boost warrants scrutiny now. The government needs to provide a "better answer" to this "disjunct"—the sizeable boost in spending without corresponding improvements in outcomes.

In summary, while Chancellor Reeves' Nov '25 Budget was successful in building a "thicker fiscal buffer" and receiving a "merciful" verdict from bond markets, the underlying analysis reveals a critical flaw: the large fiscal expansion is currently failing to deliver tangible benefits to the public. The source advises that it is "Time to start asking questions" if the government cannot point to where this near-£100 billion annual increase in expenditure is having a concrete effect.

The situation is akin to a massive investment in new gym equipment (extra spending) which is meant to improve the health of the community (state outcomes). The sources note that while the spending on equipment has been huge, the community's health metrics have not improved, leading the analyst to question whether the investment was misplaced or if the gym lacks effective trainers (reforms).

The sources discuss the OBR Growth Downgrade as a significant macroeconomic context underpinning Chancellor Rachel Reeves' November '25 UK Budget, noting both its origin and its paradoxical benefit to the government's fiscal maneuvering.

The OBR Growth Downgrade

The most "hefty change" in the economic backdrop for the budget was the downgrade in growth expectations by the Office for Budget Responsibility (OBR).

• Origin: The sources agree that the Chancellor, Rachel Reeves, is "right to say that this is mostly a verdict on the past decade, not this government".
• Optimism: Despite the downgrade, the OBR remains among the "most optimistic forecasters of growth out there". A chart illustrates that even the downgraded OBR forecast for 2026 Real GDP Growth (1.37%) is higher than the median independent forecast (1.17%) and only mildly out of consensus, compared to being "vastly out-of-consensus" previously. The OBR notes that the Bank of England is also on the optimistic end compared to the private sector.
• Long-Term View: The sources reference a "longue-duree chart" from the OBR's supplementary productivity note, which reminds the reader that no economic era lasts forever. While the current period looks poor—"about as poor any point since the growth slowdown of the late Victorian era"—the right mix of policy and technology retains the potential to "turn things around".

Context within the Analysis of the Nov '25 UK Budget (Reeves)

The OBR's forecast changes, including the growth downgrade, were critical in shaping the fiscal environment for the Nov '25 Budget, in both challenging and beneficial ways:

1. Challenging the Chancellor: A weaker growth forecast typically limits the government's expected future tax revenue, making it harder to comply with fiscal rules and fund spending commitments.
2. Paradoxical Benefit (Fiscal Drag): Despite the growth downgrade, the overall impact of the OBR's macroeconomic forecast changes was "not as damaging for the government as widely expected". This was due, in part, to changes in expected employment levels, but also due to Fiscal Drag. Reeves, like Jeremy Hunt in 2023, "paradoxically benefitted from higher expected inflation and wage growth". This higher nominal growth pushes more income into the frozen tax brackets, resulting in more revenue without explicit tax rises—a dynamic the OBR diplomatically termed "more 'tax rich' nominal growth".
3. Chancellor's Response: Reeves approached the forecast downgrade in what the sources deemed "exactly the right way," by promising to "beat the forecasts". She stated, "We beat the forecasts this year and will beat them again," which is highlighted as the appropriate response, rather than "whinging about the unkindness of the OBR".

In essence, while the OBR growth downgrade highlighted significant long-term structural weakness in the British economy, it provided Chancellor Reeves with a political opportunity to claim a moral victory by promising to exceed low expectations. Furthermore, the underlying mechanics of the OBR's revised forecasts, particularly the expectation of higher nominal growth, provided a hidden, politically beneficial revenue stream through fiscal drag, effectively making the economy "more 'tax rich'" for the government.

The OBR growth downgrade is like a doctor telling an athlete their long-term health prospects are lower than hoped (the verdict on the past decade). While bad news, the diagnosis came with a silver lining: the athlete's current metabolism (higher nominal growth) meant they could absorb more high-calorie food (tax revenue from fiscal drag) than expected, making their immediate financial situation less dire, even as they promised to defy the gloomy prognosis.

The sources discuss the concept of Fiscal Drag as a crucial element that benefited Chancellor Rachel Reeves in the preparation and presentation of her November '25 UK Budget, especially in the wake of the OBR's macroeconomic forecast changes.

Benefit from Fiscal Drag

Fiscal drag is described as a mechanism where the government benefits from macroeconomic factors without having to announce explicit tax increases. Specifically:

• Mechanism: Like Jeremy Hunt in 2023, Chancellor Reeves "paradoxically benefitted from higher expected inflation and wage growth".
• Result: This higher nominal growth pushes "more income into higher (frozen) tax brackets".
• OBR Terminology: The Office for Budget Responsibility (OBR) used the diplomatic phrase "more 'tax rich' nominal growth" when describing this dynamic.

A commenter noted that fiscal drag is being used as a "stealth tax mechanism," highlighting that it is "basically the same playbook Hunt" used, but now with Labour holding the pen.

Furthermore, the specific policies in the budget, such as "back-loaded freezes to thresholds," are noted as contributing to personal tax rises, meaning inflation pushes more people into higher tax brackets.

Context within the Analysis of the Nov '25 UK Budget (Reeves)

The benefit derived from fiscal drag was essential because it mitigated the financial damage caused by the OBR Growth Downgrade.

1. Offsetting Macroeconomic Damage: The source states that the overall impact of the OBR’s macroeconomic forecast changes "wasn’t as damaging for the government as widely expected". While changes to expected employment levels contributed, fiscal drag was a key reason for this mitigation.
2. Supporting Revenue: Fiscal drag allowed the government to generate substantial additional revenue through frozen tax thresholds. This revenue stream helped the Chancellor in her overall strategy for the Nov '25 Budget, which was designed to "skew more tax-heavy" and "build up a thicker fiscal buffer". The total fiscal story involves approximately £79 billion in extra tax receipts by the end of the parliament.

In short, fiscal drag functions as an invisible tax collector that ensures the government's revenue stream remains robust even when the outlook for real economic growth is downgraded. It provided Reeves with unexpected fiscal headroom, allowing her to present a budget that successfully achieved a "merciful" verdict from the bond markets.

Fiscal drag is essentially like adjusting the calibration on a gas pump so that even though the driver believes they are paying the same price for a gallon of fuel, a tiny bit more money goes to the station owner for the same volume of gas. By freezing tax thresholds during periods of inflation, the government ensures that a larger proportion of people's rising nominal income flows into the public purse, acting as a discreet, yet powerful, means of increasing taxation.

The sources detail several key policy measures introduced in Chancellor Rachel Reeves' November '25 UK Budget, focusing on both the spending and taxation sides, and placing them in the context of the government's overall fiscal and philosophical direction.

Key Policy Measures Introduced

The "key summary, for the real geeks", provides the specific policy details of the budget, highlighting significant changes in both spending and revenue generation:

A. On the Spending Side

The largest single change introduced in this budget related to welfare:

• Welfare Reversals: The biggest spending measure involved "reversals on previously-announced welfare cuts".
• Two-Child Benefit Cap: This also included the "removal of the two-child benefit cap".

B. On the Tax Side

The budget introduced a range of tax measures, many of which targeted specific behaviors or income streams:

• Personal Tax Rises (Fiscal Drag): The primary way personal taxes were raised was through "back-loaded freezes to thresholds". This mechanism ensures that inflation pushes more people into higher tax brackets, which is a form of personal tax rise.
• Salary Sacrifice Pensions: The budget involved "applying national insurance to salary sacrifice pension contributions". This was associated with the introduction of a £2,000 cap on salary sacrifice pensions, which stems from a long-standing focus on narrowing the gap between taxes on labour income and assets.
• Property, Savings, and Dividends: Higher income taxes were charged on "property, savings and dividend income". Tax on property and savings income was specifically singled out to be raised.
• Electric Car Taxes: New "electric car taxes" were introduced. The sources note this is a "good" measure, arguing it is "better to get them in before there’s a bigger group of EV-owners to lobby against them". However, the sources also caution that the new tax will need to be "quite a bit higher to make up" for the eventual loss of fuel duty revenue as EVs proliferate, otherwise it risks creating an "inadvertent subsidy for driving".
• Online Gambling: There were "higher taxes on online gambling", which the author deemed "good".
• Tax Compliance: The budget included an effort to raise "more money from better tax compliance", which is cynically called a "classic fudge".
• Soak-the-Rich Measures: A few smaller "soak-the-rich measures" were included. These included a "fudge to add a specific extra surcharge to expensive houses" rather than reforming property taxes entirely, which is expected to "cause distortions".

Policy Context within the Nov '25 UK Budget Analysis

The selection and nature of these policy measures reflect several key themes discussed in the broader analysis of the Nov '25 Budget:

• Tax-Heavy Skew: The policy mix ensured the budget "skewed more tax-heavy," supporting the overall narrative of generating significant revenue (approximately £79 billion in total extra tax receipts by the end of parliament).
• Resolution Foundation Fingerprints: Several measures bear the "fingerprints of the Resolution Foundation think tank," whose former head, Torsten Bell, was reportedly closely involved. This influence is visible in policies that emphasize addressing inequality, such as raising taxes on assets (property, savings, dividends) to narrow the gap with labor income.
• Hidden Tax Rises: The reliance on freezing thresholds highlights the government's utilization of fiscal drag as a "stealth tax mechanism," enabling revenue generation without politically explicit tax increases.
• Absence of Reform: Despite the gravity of the fiscal changes, the budget was "alarmingly light" on meaningful, growth-boosting reforms. The author regretted the absence of policies necessary to accompany the Expansion of the State.
• Future Challenges: While not new policies, the OBR helped the government by calling out "potent fiscal landmines"—specifically the growing costs of asylum and special-needs schooling—which are issues the government must eventually address with policy.

In essence, the key policy measures in the Nov '25 Budget focused on funding a larger state through welfare reversals and targeted tax increases, often utilizing less transparent methods like fiscal drag, while avoiding deep structural reforms that would improve growth outcomes.

The sources clearly identify the Resolution Foundation (RF) think tank as a significant influence on the policy choices made in Chancellor Rachel Reeves' November '25 UK Budget.

Resolution Foundation Influence

The source notes that Torsten Bell, who "formerly ran the Resolution Foundation think tank," was "reportedly closely involved with this budget".

This involvement is directly linked to the specific policy measures included in the budget, as the sources suggest that the budget exhibits the "fingerprints of the Resolution Foundation think tank".

The sources provide context for this influence:

• RF's Worldview: The Resolution Foundation's work is characterized by leaning "very heavily into worries about inequality," reflecting the era (around 2010) when the organization significantly came to the fore.
• Policy Goal: This worldview translates into a specific policy focus: "narrowing the gap between the taxes on labour income and assets".

Specific Policies Showing RF Fingerprints

Several key tax measures introduced in the Nov '25 Budget are cited as evidence of the Resolution Foundation's influence:

1. Taxation of Assets: Tax on "property and savings income was singled out to be raised". This directly aligns with the longstanding focus of narrowing the gap between taxes on assets and labor income.
2. Housing Surcharge: Instead of fully reforming property taxes, the government introduced a "fudge to add a specific extra surcharge to expensive houses". This specific, targeted measure is viewed as reflecting the RF's anti-inequality approach.
3. Pension Cap: The introduction of a "£2000 cap on salary sacrifice pensions" also had a similar focus on reducing tax advantages for certain asset or savings mechanisms.

Context within the Analysis of the Nov '25 UK Budget (Reeves)

The influence of the Resolution Foundation shapes the overall analysis of the Nov '25 Budget by explaining the underlying philosophy behind the government's tax choices:

• Tax Mix: The RF's focus on inequality contributed to the overall budget being "more tax-heavy", particularly through taxes targeting wealth and high earners, helping the Chancellor generate the estimated £79 billion in extra tax receipts by the end of the parliament.
• Critique of Targeted Taxes: The author expresses concern about the consequences of this targeted approach. Specifically, the housing surcharge is expected to "cause distortions" rather than addressing structural problems. Furthermore, the author notes that Britain's current tax system may already "over-taxes the rich" compared to similar countries, which presents a potential worry when introducing further soak-the-rich measures.
• Absence of Reform: Despite the introduction of targeted, inequality-focused taxes, the budget was still criticized for being "alarmingly light" on "meaningful growth-boosting reform", suggesting that while the government addressed fairness, it neglected efficiency and growth.

Thus, the Resolution Foundation's influence is seen primarily in the budget's efforts to raise revenue by correcting perceived tax advantages for asset owners and higher earners, aligning with its core mandate of focusing on inequality, even if the methods (like the property surcharge) introduced potential new complexities.

The sources identify the Motor-Tax Landmine as a significant, long-term fiscal challenge that the November '25 UK Budget began to address, though the issue remains largely unresolved.

The Motor-Tax Landmine

The "motor-tax landmine" refers to the looming fiscal problem associated with the erosion of the fuel duty tax base as Electric Vehicles (EVs) become more common.

The key points regarding this issue are:

1. New Policy Introduction: Chancellor Reeves' Nov '25 Budget introduced new electric car taxes. The author described this policy as "good news".
2. Rationale: The timing of the new tax was praised because it is "better to get them in before there’s a bigger group of EV-owners to lobby against them".
3. The Threat: Fuel duty is characterized as a "decent-sized tax". As EVs "proliferate," that tax base "goes away".
4. Consequence: The decline of fuel duty means that "motoring in general will get cheaper relative to other forms of transit".
5. Insufficient Measure: The new tax introduced in the budget will need to be "quite a bit higher to make up that gap" left by the loss of fuel duty revenue. If the government fails to raise the tax sufficiently, it risks creating an "inadvertent subsidy for driving". While EVs are less polluting than gasoline cars, the author argues that any subsidy should be a deliberate policy choice, not one that happens "invisibly".

Context within the Nov '25 UK Budget Analysis

The discussion of the motor-tax landmine fits into the analysis of the Nov '25 Budget in two ways:

• Specific Tax Measures: The introduction of the EV tax was one of several targeted tax rises in a budget that "skewed more tax-heavy". It represents a rare instance where the government proactively addressed a long-term structural tax challenge, unlike the more immediate and distortionary "fudge" of adding a surcharge to expensive houses.
• Need for Reform: The landmine is an example of the structural challenges facing the British state. While the OBR also highlighted other "potent fiscal landmines" such as the growing costs of asylum and special-needs schooling, the motor tax issue relates directly to the tax base. The analysis concluded that despite the budget’s "Big moves" in spending and taxing, it was "alarmingly light" on the "meaningful growth-boosting reform" needed to ensure the long-term success of the expanding state. The initial EV tax is a small step toward necessary structural reform, but the magnitude of the looming revenue hole remains a major concern.

In essence, the motor-tax landmine represents a future revenue cliff. While the Nov '25 Budget successfully planted a marker by introducing a new electric car tax, the sources caution that this initial policy is far from sufficient to replace the vast revenue loss from fuel duty that will occur as EV adoption accelerates.

The sources critique the government's approach to discussing and managing inflation, particularly within the context of the November '25 UK Budget, labeling it a "Flawed Inflation Discussion."

The Nature of the Flawed Inflation Discussion

The author notes a persistent issue in British politics regarding how inflation is addressed, stating that this flaw "extends well beyond this Budget":

• Excessive Focus on "Bodges": There is "far too much focus on one-off bodges to administered prices to manipulate the headline rates".
• Insufficient Focus on Policy Stance: Conversely, there is "far too little" focus on the "overall stance of fiscal and monetary policy—which actually determines where inflation lands in the long run".

Evidence of the Flaw in the Nov '25 Budget

The Nov '25 Budget provided clear examples of this flawed discussion:

• Energy Bill Giveaways: The budget included measures where the inflation impact was "highly negative in the immediate future" due to "some energy bill giveaways".
• Peculiar Chart: The author highlights a "peculiar chart" demonstrating this manipulation.
• Political Motivation: The sources acknowledge that politicians face difficulties with the "politics of affordability" and feel pressure to "be seen to be doing something".

The Consequences of the Flawed Approach

While acknowledging the political necessity of addressing affordability, the sources warn that entrenching the notion that inflation can and should be dealt with by the government "fiddling with prices is a real problem". This means that short-term, targeted interventions (the "bodges") overshadow the critical need to address the underlying drivers of long-term price stability (fiscal and monetary policy).

Context within the Analysis of the Nov '25 UK Budget (Reeves)

The flawed inflation discussion highlights a broader theme of political expediency over structural reform in the Nov '25 Budget:

• Avoidance of Deeper Reform: The government used short-term fixes for inflation (energy giveaways) while the budget was "alarmingly light" on "meaningful growth-boosting reform".
• Fiscal Drag Paradox: Paradoxically, while the government was seen fiddling with administered prices to lower the headline inflation rate in the short term, Chancellor Reeves "paradoxically benefitted from higher expected inflation and wage growth" (nominal growth) in the OBR's forecast, which generated revenue through Fiscal Drag. This further complicates the government's overall message on inflation.

In essence, the flawed discussion on inflation means the Nov '25 Budget employed political smoke and mirrors, using targeted giveaways to temporarily suppress the symptom (headline inflation) while avoiding a clear articulation or execution of the comprehensive fiscal strategy needed to genuinely control inflation in the long term.

The government's method of dealing with inflation is like using a small fan to blow cool air directly onto a thermometer to lower the recorded temperature (fiddling with administered prices), rather than fixing the faulty air conditioning system (addressing overall fiscal and monetary policy stance) that is causing the room to overheat.

The sources emphasize that the analysis of Chancellor Rachel Reeves' November '25 UK Budget is defined as much by its Significant Absences as by its policy inclusions. The budget was critically noted for its failure to deliver necessary long-term reforms, despite being a major fiscal event.

Significant Absences in the Nov '25 Budget

The most prominent absence identified by the sources is the lack of meaningful, growth-boosting reform:

• Growth-Boosting Reform: The author states that, like the previous year, there was "pretty much nothing in this budget in the way of meaningful growth-boosting reform". This lack of effort is labeled as "pretty unforgiveable".
• Targeted Reforms: The author criticizes the absence of "equally ambitious reforms" necessary for the government's expansive fiscal policies to succeed, specifically mentioning reforms to the tax system, public-service provision, and the planning system. The budget was judged to be "alarmingly light" on such reforms.
• Time for Excuses Expired: The government's first budget (October '24) could perhaps have been excused due to the need to fill a "big fiscal hole" and lack of time for comprehensive stock-taking. However, "More than a year later, they have no such excuses".

Context within the Analysis of the Nov '25 UK Budget (Reeves)

The absence of reform is central to the critique of the Nov '25 Budget because it jeopardizes the entire fiscal strategy, which involves a massive Expansion of the State.

1. Undermining the Big Bet: The government is "betting big" that the tens of billions in extra spending—part of the overall £96 billion in extra spending planned by the end of the parliament—will make a difference. The sources warn that these bets "will come good only alongside equally ambitious reforms". The absence of these reforms means the budget, despite its financial size, is structurally incomplete.
2. The Flaw in Outcomes: The lack of reforms contributes directly to the "disjunct" between the sizeable boost in state spending and the "little improvement in state outcomes" observed so far. Without reforms to public-service provision, simply pouring in more money is unlikely to solve underlying problems.
3. Untapped Tax Reform: While the budget introduced targeted tax hikes, often reflecting the Resolution Foundation Influence on issues of inequality, it failed to achieve necessary structural reform. The author lamented the introduction of a "fudge to add a specific extra surcharge to expensive houses" rather than reforming property taxes entirely. The sources referenced a joint report outlining a "cross-party agenda for tax reform," noting that there was "pretty much nothing" aligning with such substantial changes in the budget.

In addition to structural reforms, the sources identify a specific, worrying return of a Conservative-era budget tactic:

• Undeliverable Departmental Cuts: The budget included "cuts to 'unprotected' departments," a tactic described as "Jeremy Hunt redux". These cuts involve "provisionally laid out" spending restraint for departments (like policing, courts, or local government) after the next election. The author notes that these planned cuts "almost invariably, get massaged away" later by raising short-term spending. The absence here is the lack of a credible, fully funded, long-term spending plan for these essential public services.

Ultimately, the analysis suggests that Chancellor Reeves successfully managed immediate political and market risks by front-loading spending and raising taxes to create a "thicker fiscal buffer". However, by being "alarmingly light" on structural reform, the budget missed the opportunity to address the long-term drivers of British growth and public service efficiency.

The significant absences in the Nov '25 Budget are like a doctor prescribing expensive medication (extra spending) to treat a chronic illness, but forgetting to recommend the necessary lifestyle changes (structural reforms) that would actually cure the patient in the long run. Without those changes, the patient (the economy) will remain weak, despite the high cost of treatment.

The sources discuss the "Unprotected Departments' Squeeze" as a specific accounting tactic used in the November '25 UK Budget (Reeves), labeling it as a return to an old fiscal fiction and a "Jeremy Hunt redux."

The 'Unprotected Departments' Squeeze

This specific tactic involves penciling in cuts to certain areas of public spending later in the forecast period to make the overall aggregate spending figures look compliant with fiscal rules, while knowing that these cuts are unlikely to ever materialize.

Key elements of this squeeze include:

• Tactic Description: Because department-by-department spending is allocated less frequently and less far out than the total "envelope" of spending planned by the government, opportunities arise to "pencil in long-term cuts" to "flatten the aggregate numbers".
• "Unprotected" Areas: These cuts are directed towards "unprotected" departments. These are often the "unsexy bits of spending like policing, courts or local government".
• Undeliverable Cuts: The author notes that these cuts are "probably-undeliverable spending cuts". Historically, these planned cuts "almost invariably, get massaged away" later by raising short-term spending and "pushing restraint further into the future".
• Political Precedent: This dynamic is explicitly compared to the previous Conservative government's tactics, being labeled as "Jeremy Hunt redux". The sources recall that the last few OBR reports on Tory budgets included charts showing that once existing commitments were incorporated, there was "not enough money left to fund everything else" without these unrealistic cuts. The sources confirm they are now seeing the "same dynamic from Labour".

Context within the Analysis of the Nov '25 UK Budget (Reeves)

The use of the "unprotected departments" squeeze is analyzed as a continuation of the government's tendency toward fiscal maneuvering and a contradiction of its broader policy goals.

1. Fiscal Fictions and Front-Loading: This squeeze is a form of "fiscal fiction" that complements the overall Fiscal Front-Loading Strategy. While the Nov '25 Budget increased borrowing and spending in the short term, it relied on these long-term, provisional cuts after the next election (2029-30) to achieve nominal fiscal compliance.
2. Expansion of the State vs. Hidden Cuts: The central theme of the Labour government's strategy is the Expansion of the State, with a huge commitment to approximately £96 billion in extra spending. The squeeze on unprotected departments sits in tension with this large-scale spending increase, highlighting that while funds are being poured into "protected" areas (like the NHS), other essential public services are being subjected to an unrealistic financial restriction that makes the overall budget numbers look better than they are.
3. Absence of Credible Reform: The adoption of this tactic fits into the Significant Absences of the budget. Instead of offering a credible, funded plan for long-term public service provision reform, the government used this "classic fudge" to push spending restraint far into the future, thus failing to address the structural issues driving the Lack of Visible Outcomes.

The "unprotected departments" squeeze is analogous to a family promising to save money by cutting back on essential maintenance (like fixing the roof or maintaining the car) for several years down the line. While this makes their immediate bank statement look good (fiscal compliance), everyone knows that these necessary costs will eventually have to be paid, likely at a higher price, by a future administration.

The sources identify Under-the-Radar Fiscal Landmines as serious, ongoing cost pressures that were highlighted by the OBR but remain structural challenges for the British state, even following Chancellor Rachel Reeves' November '25 UK Budget.

Under-the-Radar Fiscal Landmines

The final point of the source’s analysis focuses on fiscal pressures that the OBR (Office for Budget Responsibility) brought to light, which represent significant future costs for the government:

• Identified Threats: The OBR "helpfully called out a few of the most potent fiscal landmines affecting the British state".
• Specific Costs: These landmines are the growing, challenging costs associated with "asylum and special-needs schooling".
• Urgency: The sources emphasize that "Getting a grip on the cost of asylum and special-needs schooling in particular is tough but vital".

The conclusion is that these are not one-off issues but persistent problems that must be addressed, and observers should "Expect those issues to recur".

Context within the Analysis of the Nov '25 UK Budget (Reeves)

While the Nov '25 Budget was focused on immediate spending and tax maneuvers, the existence of these fiscal landmines highlights the severe underlying pressures facing the government and underscores the budget's broader deficiencies:

1. Challenge to the Expansion of the State: The government's strategy involves a massive Expansion of the State (public spending rising to 44–45% of GDP). These unaddressed landmines are continuous, non-discretionary costs that consume a portion of this expanded budget and make it harder for the government to demonstrate where the £96 billion in extra spending is translating into visible improvements.
2. Absence of Structural Reform: The presence of these growing, vital costs (asylum and special-needs schooling) reinforces the criticism regarding the Significant Absences in the budget. The analysis argued that the government's "big bet" on increased spending would succeed "only alongside equally ambitious reforms" to public-service provision. The budget was "alarmingly light" on such reforms. Addressing the structural costs of asylum and special-needs schooling would require precisely the kind of difficult public-service reforms that were missing from the Nov '25 offering.
3. Fiscal Maneuvering vs. Real Problems: The government chose to employ Fiscal Front-Loading Strategy (kicking the can down the road) and the 'Unprotected Departments' Squeeze (penciling in unrealistic future cuts) to manage short-term compliance. These temporary tactics contrast sharply with the immutable and vital long-term challenges posed by the fiscal landmines.

In summary, the under-the-radar fiscal landmines of asylum and special-needs schooling represent serious, growing expenditures that the OBR explicitly called attention to. The Nov '25 Budget failed to present a credible reform agenda to get a grip on these vital costs, suggesting that they will continue to undermine the government's fiscal stability in the coming years.