Chancellor Rachel Reeves has confirmed £26 billion in tax rises as the Office for Budget Responsibility (OBR) warned of weaker economic growth, higher inflation, and rising unemployment.

The Budget includes a continued freeze on income tax thresholds, which will leave 1.7 million more people paying higher rates. The OBR said the measures will push the tax burden to a record level.

The government said the increases reflect downgraded economic forecasts and growing welfare spending.

NHS Funding Commitments

Reeves pledged to “renew” the NHS and confirmed new funding for health service technology. 

She told MPs that the government will invest £300 million in technology “to improve patient service” and will create 250 neighbourhood health centres to expand services in communities.

She said more than 100 centres will be delivered by 2030, including in Birmingham, Truro, and Southall.

“The Labour Party founded our NHS and we are renewing our NHS," Reeves said.

Welfare and Compensation Measures

The Chancellor announced that the two-child benefit cap will end in April. She described the cap as “a policy that pushes kids into poverty more than any other” and said it had “failed” on its original aims.

Reeves added: “I understand that many families are finding times hard, and that many have had to make difficult choices when it comes to having kids.”

She also confirmed that all payments from the Infected Blood scheme will be exempt from inheritance tax.

Budget Details Published Early

In an unprecedented blunder, full details of the Chancellor’s plans were published by the OBR more than half an hour before she stood up in the Commons chamber.

The budget watchdog forecast gross domestic product would grow by 1.5% this year, an increase from its earlier 1% forecast.

But it downgraded growth in 2026 from 1.9% to 1.4%, in 2027 from 1.8% to 1.5%, in 2028 from 1.7% to 1.5% and in 2029 from 1.8% to 1.5%.

The OBR said the Budget “raises taxes by amounts rising to £26 billion in 2029-2030, through freezing personal tax thresholds and a host of smaller measures”.

Impact on Taxpayers

The freeze in thresholds will result in 780,000 more basic-rate, 920,000 more higher-rate, and 4000 more additional-rate income tax payers by 2029-2030 as earnings rise over time. Scotland continues to set its own income tax rates.

People are dragged into paying 20% income tax if their earnings rise above £12,570, with the 40% rate from £50,271 and the 45% band from £125,140.

The freeze in income tax and national insurance contributions, which will extend until 2030-2031, will rake in £8.3 billion for the Exchequer in 2029-2030.

Reeves acknowledged the freeze in tax thresholds would hit “working people” — the group Labour had promised to protect — but she was “asking everyone to make a contribution”. That includes raising £4.7 billion through charging national insurance on salary-sacrificed pension contributions and £2.1 billion through increasing tax rates on dividends, property, and savings income by two percentage points.

She confirmed a new mansion tax, a “high value council tax surcharge”, of £2,500 for properties in England worth more than £2 million, rising to £7,500 for those worth more than £5 million.

The combination of new announcements on top of existing measures means that tax as a share of the economy – the tax-to-GDP ratio – will “increase to an all-time high of 38.3%” in 2030-2031, the OBR said.

Conservative leader Kemi Badenoch said the Budget was a “total humiliation” for Rachel Reeves and “if she had any decency she would resign”.