As Rachel Reeves prepares for the Spring Forecast Statement in March, it’s an opportune moment to review her fiscal journey since being appointed Chancellor in 2024. Ms Reeves has faced significant challenges, from inheriting what the government described as a £22 billion ‘black hole’ in the public finances, to navigating global economic uncertainty and rising borrowing costs.
Here we examine her major fiscal statements, their impact on business and the wider economy, and look forward to Reeves’ Spring Forecast Statement 2026.
Autumn Budget 2024: a historic tax rise
Delivered on 30 October 2024, Ms Reeves made history with a Budget featuring tax rises totalling £40 billion, the largest tax-rising Budget in modern times.
The centrepiece was a significant increase in employers’ National Insurance Contributions (NICs). From 6 April 2025, the rate rose from 13.8% to 15%, while the Secondary Threshold was reduced from £9,100 to £5,000 annually. To cushion the blow for smaller firms, the Employment Allowance increased from £5,000 to £10,500 with the £100,000 eligibility cap removed.
Other headline measures included bringing private pensions into the Inheritance Tax (IHT) regime from April 2027, applying VAT to private school fees from January 2025, and increases to Capital Gains Tax (CGT) rates. The personal allowance, higher rate threshold and additional rate threshold were frozen until 2027/28. The IHT threshold on Agricultural Property Relief (APR) and Business Property Relief (BPR) was lowered to £1 million, sparking high-profile protests that prompted the government to raise the cap to £2.5 million just before Christmas.
The business community’s response was decidedly mixed. The British Chambers of Commerce (BCC) described it as a ‘tough Budget for business to swallow’.
Spring Statement 2025: welfare cuts and tough choices
By March 2025, the economic picture had darkened considerably. The OBR halved its GDP growth forecast for 2025 from 2% to 1%, driven by weaker productivity and global uncertainty. Ms Reeves’ fiscal headroom had been significantly eroded by higher borrowing costs.
The welfare reforms prompted significant opposition from within Labour’s own ranks, with over 120 MPs expressing concerns. However, Ms Reeves ruled out further large-scale tax rises.
Autumn Budget 2025: building headroom
Ms Reeves’s |Budget in 2025 delivered another £26 billion in tax rises by 2029/30. Key measures included extending the freeze on Income Tax thresholds for a further three years until 2030/31. This fiscal drag would see the personal allowance, higher rate threshold and additional rate threshold remain frozen at £12,570, £50,270 and £125,140 respectively.
The Budget also reformed Individual Savings Accounts (ISAs) from April 2027, setting the annual cash limit at £12,000 within the overall £20,000 ISA limit. CGT relief for company owners selling to Employee Ownership Trusts was halved from 100% to 50%.
Impact so far: mixed progress
The tangible impacts of Ms Reeves’ policies have been varied and, in some cases,
Increases to employers’ NICs, which took effect in April 2025, demonstrably increased business costs. Research indicates many SMEs absorbed costs through reduced salary increases rather than recruitment. Kate Nicholls, Chair of UK Hospitality, claimed the NICs rise would cost the sector £1.3 billion annually.
The tax burden is forecast to reach 37.7% of GDP by 2027/28, the highest in 70 years. The Institute for Fiscal Studies (IFS) noted that Ms Reeves is ‘choosing to spend more and borrow more’ in the short term than previously planned.
The welfare cuts sparked considerable controversy. The government’s own impact assessments showed that up to 3.2 million families would lose an average of £1,720 per year, with 250,000 people expected to fall into relative poverty, including 50,000 children.
However, there were some positive notes. Real household disposable income growth is expected to be higher than previously forecast, with the OBR projecting households would be £500 better off under Labour by the end of the Parliament.
Looking ahead
The Chancellor has pursued a clear fiscal strategy: substantial tax rises to repair public finances, combined with targeted spending increases on priority areas. Her unwavering commitment to meeting self-imposed fiscal rules has necessitated difficult choices.
Business confidence remains fragile. The BCC has warned that businesses need ‘the right confidence and certainty to invest and grow’ and called for ‘no further tax rises on business and greater support to unlock investment and safeguard growth’.
Keep updated with Mercia
As the Spring Statement 2026 approaches, Ms Reeves faces continued pressure to demonstrate that her fiscal consolidation strategy can deliver the economic growth Britain needs. Keep up to date with Mercia’s Spring Forecast Statement analysis and content here.