26 November 2025
If you are covering Rachel Reeves’ budget and the market reaction to it, please find below a comment from Lindsay James, investment strategist at Quilter:
“This has already become one of the most memorable Budget statements to date as a result of the early leak of the Office for Budget Responsibility’s forecasts, rather than necessarily the measures brought about by the Chancellor. It has given markets an early look at the Budget measures and for now the response is fairly muted. An initial fall in bond yields has quickly reversed, but as we saw last year the true impact is not necessarily felt for days or even weeks later.
“While Rachel Reeves attempts to spin the OBR’s forecasts, it is clear that reality is far from rhetoric. Economic growth forecasts for 2025 may have been upgraded, but productivity has been downgraded, inflation is expected to be higher and spending is going up. Indeed, borrowing is rising and only being cut towards the end of the forecast period. Compared to March’s forecast, it is estimated to be £21 billion (0.7 per cent of GDP) higher in 2025-26, but still lower by £6 billion (0.2 per cent of GDP) in 2029-30, resulting from some of the more significant tax raising measures not kicking in until 2028, bringing some added uncertainty over its revenue-raising potential.
“Furthermore, the government has doubled down on welfare spending, with it now set to rise by an average of £11bn a year up from 2026 to the end of 2030. This makes the tax rises announced today permanent at least for length of the Labour government, not a temporary measure necessary to fill any fiscal holes or build up buffers. For a government looking for economic growth, this is not necessarily the best approach to achieving it.
“There is some welcome good news that inflation will be helped by measures on energy bills, dampening it by just over 0.4% next year and theoretically raising the potential of more significant interest rate cuts. But it is worth noting that the OBR have increased their forecasts for CPI since March due to existing price pressures, which threatens to negate the impact of this measure. However, moving to a single assessment of the fiscal rules per year is a positive development and should help remove some of the daft tweaking of fiscal policy based on what a forecast says.
“For now, however, Reeves and this government continue to hope that growth somehow returns and inflation falls. The trouble is that many of the measures announced by Reeves today are untested, such as a mansion tax. Distortions and unexpected behaviour changes will occur and as such make some of these forecasts at risk of further cuts.”
