Budget 2025 - Fiscal headroom rises, but the UK’s growth problem remains untouched

Martin Beck, Chief Economist | Vincenzo Rampulla, Director

Rachel Reeves’ second Budget doubles the government’s fiscal headroom with a more modest tightening of fiscal policy than expected, but relies heavily on a patchwork of delayed tax rises. The public finances look more stable in the near term, yet the Budget offers little to boost long-term growth, improve public sector productivity or deal with the structural drivers of high UK energy prices.