Economic experts’ breakdown the 2025 Autumn Budget

On Wednesday 26 November, the 2025 Autumn Budget was presented in the House of Commons for the second time by Chancellor Rachel Reeves. Expert economics academics at the University of Derby have broken down what was announced and what it means for the UK economy.

Dr Eugene Michaels, Senior Lecturer in Economics at the University of Derby, said:

“After an agonising period of speculation fuelled by various leaks, pre-announcements and U-turns on intentions, we finally got to the Budget to find the Chancellor’s wind being knocked out of her sails by an unprecedented accidental release of the OBR report only minutes ahead of her delivery.

“In a noisy event overall, the Chancellor delivered an unabashedly partisan Budget statement to a raucous chamber of MPs which clearly focused on her main target audiences: the Labour MPs, the ‘markets’ and the ‘working people’.

“The volatility (i.e. dips) initially shown in the markets (government bonds, foreign exchange and stock exchange) was short-lived. At the time of writing, bond yields are back to the relatively lower and stable levels seen at the beginning of November, the pound is slightly up on the day, and the FTSE indices are continuing to rise higher from the lows of last week.

“The overall impression is that the Budget is not as bad as it was feared, especially with the support of the OBR assessments on growth, productivity, inflation, and budget and debt forecasts.

“Despite raising the amount of tax levied to an all-time high of 38% of GDP by 2030-31, the budget also increases spending every year, cushioning the blow. The Chancellor also managed to increase her fiscal headroom by more than double the margin expected back in March 2025. A standout feature is the fact that tax rises are mainly scheduled towards the end of the period (mainly from 2028). However, this may also prove to be problematic as the sums may not add up as time goes on.”

Trevor Williams, Visiting Professor at the University of Derby and former Chief Economist at Lloyds Bank Commercial Banking, said:

“When the Chancellor announced a £2,000 annual cap on salary sacrifice into pensions, it appeared as a minor adjustment. However, it could significantly influence the UK's pension incentive structure, potentially altering saving behaviour, workplace culture, and long‑term capital markets, which warrants closer examination.

“There was a fiscal hole to fill, and this is seen as one way to help fill it. Moreover, with the 'triple lock', pensioners have seen their income rise relative to other income groups over time. But this cap may also lead to a shift in savings behaviour. Pension funds could see reduced inflows, potentially changing asset allocation patterns. Future pensioners might save less, increasing the risk of poverty among retirees and raising social security costs, which highlights the importance of considering long-term social impacts in the debate.

“Ultimately, the £2,000 cap is not just a technical adjustment but the latest chapter in a 20‑year tightening cycle. As much as any other item of fiscal policy, pensioners are not immune to the pressure put on the public purse. Whether it proves to be a fair rebalance or a blow to savings will depend on how individuals, employers, and financial markets respond.”

Fahad Kazmi, Lecturer in Economics at the University of Derby, said:

“The Chancellor has announced a further three-year freeze on income tax and national insurance thresholds. This announcement was expected, as the government will continue to receive higher tax revenue - as more people enter higher tax brackets - without formally increasing the tax and NI base rates. This may disincentivise people from entering higher tax brackets, if they feel the effort and cost of doing so outweighs the benefits of more income.”

“It was also announced that the basic and higher rates on property, dividends and savings income will go up by two percentage points each. This was expected, as the government seeks to raise additional revenue to plug the fiscal gap. On the dividend and savings front, this change will discourage potential small business owners from enjoying the fruits of their enterprise – keeping funds locked into the business instead of being reinvested into the broader economy.

“Increases to property tax may result in landlords increasing rents, thereby worsening the disposable income for households – which is already under pressure due to the cost-of-living crisis – suppressing aggregate demand further. The high-value council tax surcharge for properties worth more than £2 million is a welcomed move as council taxes for the broader community have already been increasing sharply over the years. Whether the revenue generated from this move will be sufficient remains to be seen.

“Overall, I feel public sentiment surrounding the budget was not as bad as initially thought. The challenge remains for the Chancellor to keep government borrowing under check by achieving her fiscal rules of ensuring daily government expenditure doesn't exceed income, and to keep inflation trajectory on a downward path towards 2%.”

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