December 27, 2025
November 2025 Budget Statement – Key Takeaways and Impact
On November 26th, Rachel Reeves unveiled the Government’s annual Budget, setting out Labour’s roadmap for the economy and public finances in the year ahead.
Among the most significant measures were a three-year freeze on income tax thresholds, a new council tax surcharge on properties valued above £2 million, a £2,000 cap on salary-sacrifice pension contributions, the removal of the two-child limit in Universal Credit, and increases in the national minimum and living wages.
But what do these jargon-heavy announcements actually mean for people across the country? This report aims to provide clarity.
Across political parties, think tanks, business groups and other organisations, the reaction has been sharply divided. Some argue the Chancellor deserves credit for identifying a £22 billion fiscal breathing space, while others criticise the Budget for what they see as a notable lack of long-term economic vision.
What is most apparent to us at the Harrison Foundation is that although the Government has repeatedly positioned growth as a top priority, the Budget falls short in several areas when it comes to creating the conditions businesses need to thrive.
Subsequently, it risks deepening the country’s dependence on the public sector rather than enabling a more dynamic and self-sustaining economy.
The increase in the national minimum and living wages is one way the Budget has left businesses feeling squeezed and unsupported. While this measure is justified as a response to the country’s ongoing cost of living crisis, for many small business owners, particularly those in hospitality, retail, leisure and childcare, these wage hikes will translate into significantly higher operating costs.
Subsequently, businesses may become less inclined to hire new staff as the cost of retaining existing employees rises, and some may even be forced to let staff go or reconfigure their internal structures to manage these additional pressures.
The three-year freeze on income tax thresholds compounds this challenge further, as employees facing reduced take-home pay are more likely to seek wage increases to maintain their standard of living, placing yet another financial strain on employers.
This situation is underscored by the fact that the UK is currently facing a severe vacancies crisis, with many people, particularly recent graduates and healthcare workers, struggling to secure appropriate positions.
An estimated 1.2 million graduates are, for example, competing for a mere 17,000 suitable roles. This uncertainty is intensified by the rapid rise of Artificial Intelligence which, as highlighted in previous Harrison Foundation reports, threatens to reshape vast areas of the UK economy. Young people now more
than ever need assurance from their Government that bright futures remain within reach and that meaningful jobs will be available to them once they finish university or training.
Furthermore, the Budget’s expansion of welfare provision, particularly through the removal of the two- child limit in Universal Credit, sits at odds with the Harrison Foundation’s belief in offering a hand-up rather than a handout. This shift comes at a time when 25 percent of working-age adults are economically inactive, and more than one million additional people have begun claiming some form of benefits in the past year.
When viewed comprehensively, this direction risks reinforcing patterns of dependency while doing little to nurture the active and thriving private sector the economy urgently needs.
Against this economic backdrop, three key priorities stand out to the Harrison Foundation.
Firstly, the country must reduce its reliance on the public sector, which has expanded considerably in recent years. With more than half of the workforce in parts of the North now employed by public bodies, and over 20 new quangos created since last July, bringing the national total to around 600 and costing an estimated £400 billion per year, this trajectory is neither sustainable nor conducive to long-term prosperity.
Secondly, rather than depending on an ever-growing public sector, the UK must actively support private businesses to establish themselves, expand and remain in regions such as the North. This requires creating a climate that eases financial pressures, encourages investment and recognises the central role that small and medium-sized enterprises play in driving regional growth.
Thirdly, the country must strengthen its skills base, ensuring that young people can access high-quality training and development opportunities. Building a more resilient and better-equipped workforce would not only help address the current vacancies crisis but also enable businesses to adapt to the rapidly changing economic landscape.
Together, these priorities form the foundation of a more balanced and opportunity-driven economy, capable of delivering the growth the government has set as its central ambition.
With thanks to Katie Homer and Peter Bould for their contributions to this report.