Budget Reaction: Another £26bn Worth of Tax Rises Despite Message of Reducing Cost of Living
Another £26bn worth of tax rises despite the Chancellor's message of reducing the cost of living, says Matthew Allen, Lecturer in Economics at the University of Salford.
Extending the 5p fuel duty cut until September 2026 is welcome news for motorists. It avoids an immediate jump in fuel costs and helps stabilise transport expenses for both households and businesses. Given how volatile fuel prices have been, this will be one of the more noticeable supports in daily life. But it’s still temporary, and we know fuel duty remains a key revenue source the Treasury will eventually revisit.
Alongside that, we’ve got freezes on rail fares and prescription charges, which should soften some of the pressure on everyday budgets. However, these targeted measures sit within a Budget that is still fundamentally raising revenue. Tax thresholds remain frozen, which quietly pushes more people into higher tax brackets as wages rise.
It’s also important to mention the impact on graduates. Many student loan repayment thresholds have also been frozen. That means graduates start paying back their loans at lower real levels of income than before. It’s another form of fiscal drag that reduces take-home pay, especially for younger workers who are already feeling cost-of-living pressures.
For households, the overall effect is mixed: yes, there’s some relief on specific bills, fuel, trains, prescriptions, but disposable income is still squeezed through higher effective taxation and frozen thresholds. Inflation is still way above the 2% target. Many people won’t necessarily feel better off, even if some costs fall slightly.
For businesses, the fuel duty extension helps with transport and logistics costs, particularly for smaller firms and delivery-based industries. But with labour costs rising, energy costs still elevated, and tax thresholds biting, business confidence may remain cautious. Businesses are also still feeling the effects of the employer NICs increases from last year’s budgets. Some firms may hold back on investment until the economic outlook feels more stable.
Overall, the Budget signals a cautious approach: selective support on everyday costs, but within a broader strategy that continues to tighten the fiscal stance. It helps with some immediate pressures, but the combination of frozen tax and student loan thresholds means many households and workers will still feel the squeeze over the coming months.
