Reeves’ Budget: Stability Secured or Public Patience Tested?
Sam Sepehri
2nd December 2025
Written by Sam Sepheri
Rachel Reeves set out her much-anticipated budget this week with the aim of strengthening the fiscal buffer. The government stressed stability and the need for broad contribution to its reforms. Extra spending is funded through higher effective taxes, delivered by freezing thresholds and scrapping selected reliefs.
Key measures include abolishing the non-dom regime and introducing a mansion tax on high-value properties. At the same time, ending the two-child benefit cap signals a shift toward a more supportive position on welfare. The Chancellor had to manage the expectations of three key stakeholders: the financial markets, her own Labour benches and, most importantly, the electorate.
Firstly, the markets reacted calmly, which provided some relief and a clear win for the Treasury. The predictable nature of the budget meant sterling held steady and gilt yields barely moved, while UK equity indexes such as the FTSE 100 rose immediately. These outcomes are undeniably a success for the government and highlight the benefits of pairing low volatility with consistency.
Similarly, the response among Reeves’ own Labour MPs was generally positive, helped by the mix of higher spending and a heavier tax burden on wealthier households amid pressure from the left. The standout policy for many was the decision to scrap the two-child benefit cap, a move expected to lift a substantial number of children out of poverty according to most independent estimates.
Even so, some MPs remain uneasy about what is now the highest overall tax burden in history and the limited departmental fiscal room the budget leaves for future public-service spending. These concerns are sharpened by the risk that voters will feel the squeeze long before they see any benefits.
The good news seems to end here for Reeves. When you turn to the electorate, most households now face higher effective taxes through frozen thresholds, reduced reliefs and the continued drag of inflation on real incomes.
The benefits of extra public spending will take time to appear, leaving many voters feeling squeezed rather than supported in the near term. The picture is slightly different for households on universal credit, whose payments rise with inflation even as real wages stagnate, but this offers only a limited offset.
Stability may still be valued, but that sentiment will be tested quickly if living standards fail to improve and the higher tax burden becomes more visible. Additionally, recent murmurs that the government overstated the severity of the fiscal situation to justify tax hikes are likely to anger taxpayers further, though both the Prime Minister and the Chancellor firmly deny the accusation.
In the months ahead, it will become clear whether the partial successes of the Chancellor’s budget translate into improved living standards and, ultimately, better polling, or if they amount to little more than taping over a cracked dam – holding back frustration for now. At present, the latter looks more likely.
