Budget 2025 live: Rachel Reeves says she doesn't deny 'impact' of Budget tax rises but says changes are 'necessary' – BBC
Phone-In: Is the Budget for 'Ordinary People'?
BBC News
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Chancellor Rachel Reeves says she doesn't deny the impact on "ordinary" people after raising taxes yesterday – here's her Budget at a glance
But she says the changes are "fair" and "necessary" – and insists they don't break Labour's election pledges
Many will pay higher rates of tax as their pay increases, after Reeves froze income tax thresholds until 2031
There are also new taxes on homes worth more than £2m in England; a pay-per-mile charge for electric vehicles; tax on pension contributions above £2,000; and changes to Isa rules
Meanwhile, the two-child cap on means-tested benefits will be lifted in April – BBC Verify have assessed the impact on child poverty
Shadow chancellor Mel Stride insists Labour has broken its election promises – while Liberal Democrat leader Ed Davey says Reeves is taxing ordinary people at record levels
Edited by Johanna Chisholm
Chris Mason
Political editor
Folk in government defiantly and proudly regard this as a truly Labour Budget.
Tax rises for good reasons, they argue, as their critics to the right argue spending, benefits and taxes are out of control.
At the heart of this Budget was the chancellor choosing to tax big and spend big.
Rachel Reeves argues doing so means the government can do what party figures regard as "good Labour things" like the decision to scrap the two-child limit on the child element in Universal Credit.
There isn't universal support for it though on the Labour benches – there is an awareness that as popular an idea as it is for many within the party, opinion polls suggest maintaining the cap was popular too.
It is an illustration of the different audiences the chancellor needs this Budget to appeal to.
It has been a busy morning after the Budget before. Here's what we've heard so far today:
We've heard plenty from politicians and experts – including the chancellor herself – this morning on yesterday's Budget.
Now, our colleagues at the Nicky Campbell show on BBC Radio 5 Live are taking calls with listeners' responses to the announcements on taxes and spending.
You can listen live at the top of the page, and we'll bring you some of their comments here.
James Cook
Scotland editor
Scottish finance secretary Shona Robison has been speaking to BBC Radio Scotland Breakfast this morning about her income tax strategy.
She says she "wants to give certainty for the remainder of this parliament" that there would be "no changes to rates and bands" in Scotland.
The income tax threshold freezes in the rest of the UK "will not impact on the Scottish budget next year because they were already confirmed to April 2028 and the extension of that won’t impact until the 2028/29 budget", Robison says.
She also confirms that the estimated annual savings to the Scottish Government of no longer mitigating the two-child benefit cap (around £120m) will all be used for "the most impactful levers" to tackle child poverty. 
Kevin Peachey
Cost of living correspondent
Budgets – as the OBR unfortunately discovered yesterday – are a matter of timing.
And as Rachel Reeves just pointed out, some of the big tax rises announced in the Budget are not actually coming into force until 2028.
They include the extension to the freeze on tax thresholds; extra costs for electric vehicle drivers; and the so-called mansion tax in England on homes worth more than £2m and £5m.
The clampdown on pension saving contributions through salary sacrifice starts even later, in 2029.
But the giveaways – such as ending the two-child benefit cap, energy bill cuts and minimum wage rises – start much sooner, in April next year.
Ultimately, it may take a while before the full implications of a busy Budget are felt in your financial position.
The chancellor is now asked how many more people will pay the higher rate of tax as a result of Reeves's freeze on income tax thresholds.
She doesn't give an exact number, but says that this will happen from 2028.
Reeves then reiterates that people will receive £150 off their energy bills and adds that train fares will be frozen for parts of England too.
Reeves is then asked about the timelines for tax changes – with the possibility of high taxes on the eve of an election in a few years' time being required to pay for the extra spending commitments in this year's Budget.
The chancellor responds that a number of tax changes will come into force sooner than that, and says that it's important to "take the time" to get things right when governments introduce new taxes.
Robinson quotes Paul Johnson, former director of economic think tank the Institute for Fiscal Studies, who states that "tax rises are mostly to finance additional spending, not because of worse forecasts".
Robinson puts it to Reeves that, when the government has repeatedly promised to protect workers, the only people they are protecting are "those that don’t work".
"Wait a second," Reeves responds.
She says that 60% of the families that will benefit from the ending of the two-child benefit cap are in work.
"The problem is that they are not earning enough to pay the bills, the rent or mortgage, or put food on the table."
She says that 450,000 children will be lifted out of relative poverty through this policy alone.
The BBC's Nick Robinson points out that Reeves repeatedly promised not to increase taxes on working people, including in the run-up to the 2024 election.
"You didn't tell people the truth," he says.
Reeves avoids answering directly, repeating that the government is going to freeze personal tax thresholds for an additional three years until 2031.
"I do recognise that is asking working people to contribute a bit more," she says – echoing similar comments made yesterday and this morning.
Reeves is then asked whether she would like to take the opportunity to apologise. She says she thinks they were the "fair and necessary choices".
The interview begins with Rachel Reeves hearing clips from last year's Budget – when she ruled out raising income tax, as well as promising not to continue the threshold freeze.
Nick Robinson asks: why should people believe what you said this morning – given that what you said last year wasn't true?
Reeves replies that listeners will understand various factors in the global economy, including higher tariffs and pressures on defence spending ,have an impact on the UK's economy.
"I have to operate in the world as it is," she explains. "They're my choices, but I'm explaining the backdrop for those choices."
We're about to hear again from Chancellor Rachel Reeves – she'll be speaking to Nick Robinson on the Today programme shortly.
You can listen live at the top of the page – and we'll bring you her comments here.
That's a bit rich, isn't it?
That's the question Shadow Chancellor Sir Mel Stride is asked on the Today programme after the Tories criticised Labour's tax rises. It was, after all, a Conservative government that first froze tax thresholds in 2021.
Stride says the Tories had particular challenges, most notably the Covid pandemic. The government intervened, he says, to protect jobs at great expense which had "fiscal consequences".
The number of people paying the higher rate of tax doubled during the Tory years, it's pointed out.
But Stride says there was also the Russian invasion of Ukraine, and the impact it had on inflation.
There is a difference between what happened during the Tories' time in office, Stride says, and "what is a clear manifesto breach" by Labour.
He says Labour made the promise not to raise taxes on "working people" – a promise that was repeated by Reeves in last year's Budget.
"That is precisely what she has done," he says.
From April 2028, electric car drivers will pay a road charge of 3p per mile, while plug-in hybrid drivers will pay 1.5p per mile
Reeves is now asked about electric vehicles, and the new per-mile tax announced in yesterday's Budget. How will the mileage be calculated?
Reeves mentions MOTs, where mileages are recorded – but it's pointed out that new cars don't have annual MOTs.
Reeves says the policy is not coming into effect until 2028, which will give the government time to make sure it works. "Everyone can check the mileage on a car, it's not a difficult thing to do," she adds.
Reeves is pressed on who drivers will report their mileage to.
She doesn't answer the question directly, repeating that the policy won't come into effect until 2028, giving the government time to work the details out.
Reeves is now pressed on that manifesto commitment we mentioned in our previous post.
She's asked to contrast that commitment with her acknowledgement that she's asking ordinary people to pay more by freezing income tax thresholds until 2031.
Reeves says it was clear in Labour's manifesto that her promises related solely to a pledge not to increase income tax rates.
But, she says that she recognises that freezing thresholds is asking people to contribute a bit more.
The chancellor is pressed on why she is shy of saying the word tax.
Reeves doesn't directly answer the question, and repeats that Labour is freezing tax thresholds for a further three years (i.e. they will be frozen until 2031, rather than 2028 as planned).
She goes on to say that she hopes to ease pressures on the cost of living and bring inflation down.
Pressed on whether the government has broken promises to the public, Reeves says she recognises that freezing tax thresholds does mean that "ordinary" people will pay more tax, and she doesn't deny the "impact".
She calls the changes "fair and necessary" and says: "I've kept the contribution to a minimum by changes elsewhere."
Some of these changes, she says, includes asking online gambling companies and people who own properties worth £2m or more to pay more.
Chancellor Rachel Reeves is first asked about the early release of the Budget by the Office for Budget Responsibility yesterday.
She says the OBR mistake was "clearly unacceptable and disappointing".
She confirms that OBR chair Richard Hughes has written to her apologising for the breach. You can read what the "mortified" Hughes told us earlier here.
The chancellor is speaking to our colleagues on BBC Breakfast now – watch live at the top of the page and stay here for key lines.
Henry Zeffman
Chief political correspondent
The immediate questions for Rachel Reeves in the aftermath of the Budget were always going to be what the markets made of it – and what Labour MPs made of it.
On those two fronts, she’ll be very pleased this morning. The market reaction was pretty benign, and the reaction of Labour MPs was more than that, it was pretty positive – if not quite exclusively positive.
Most Labour MPs I have spoken to are delighted particularly at the abolition of the two-child benefit cap. A few, though, are questioning what’s happened to the focus on growth which Reeves said for years in opposition was her number one priority.
This Budget also lays out the likely shape of the political debate for the coming months and probably years.
This is a Labour government embracing a characterisation as high-tax, high-spend. That spending, they say, is for a purpose: for improved public services, to lift children out of poverty, to reduce national debt.
But it would be wrong to assume the positive mood among Labour MPs means the questions around Keir Starmer’s leadership will dissipate.
While Labour MPs may be content today, a lot of them still think they are going to lose their jobs in at the next general election. It’s not until that changes that the conversation around Keir Starmer will change.
More from OBR chair Richard Hughes, who is asked whether any of the measures announced by Rachel Reeves yesterday meet the organisation's threshold for boosting growth.
"In this particular Budget, none of the measures either positive or negative… would have a material affect on our forecast," he responds.
"Both taxes and spending are up significantly in this Budget," he adds, explaining that the tax burden is 1% of GDP higher by the end of the forecast, while total spending will be about 1% of GDP higher too.
Meanwhile freezing income tax thresholds – which Reeves announced will last until 2031 – will bring "hundreds of thousands" more people into tax, Hughes says.
The government has previously said economic growth is its number one priority
The Office for Budget Responsibility chairman Richard Hughes tells the BBC he is "personally mortified" by yesterday's error, which saw the organisation release details of Rachel Reeves's Budget early.
Speaking to the Today programme, Hughes says he takes "full responsibility" for the mistake and adds: "We let people down yesterday and we'll make sure that doesn't happen again."
He says there will report to the Treasury after a full investigation into what happens – and says the OBR has hired a cybersecurity expert to help them understand what went wrong.
Liberal Democrat leader Ed Davey, speaking on the Today programme, says Rachel Reeves is now taxing "ordinary people to record levels".
Referencing Reeves's decision to freeze income tax thresholds until 2031, Davey calls it a "stealth tax" that will drag more low-paid people into paying income tax (see our chart below).
Nick Robinson points out that Lib Dems have previously called for several of the policies announced yesterday – including a mansion tax, a lifting of the two-child benefit cap, and an increase in the minimum wage.
"These are all your policies," Robinson says.
Davey pushes back, saying some of these were the party's policies many years ago, rather than today – such as a mansion tax.
Pressed on whether wealthy people should be taxed more on their homes, Davey says there are "fairer" ways to raise money – for example through reforming capital gains tax.
He suggests some people in high value houses – such as retirees – might have a lot of their wealth in assets, but with low income.
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