Autumn Budget 2025: Reeves set to address lawmakers after shock early release of budget details

The Office for Budget Responsibility (OBR) has given markets a surprise by publishing its forecasts for the public finances and the economy before Chancellor Rachel Reeves has unveiled her Autumn Budget, which will take place at 12.30 p.m.

The OBR report, which appears to have been published early in error, states that the U.K. economy is forecast to grow by 1.5% on average over the forecast [period], 0.3 percentage points slower than we projected in March, due to lower underlying productivity growth.”

The independent fiscal watchdog was expected to lower growth and productivity growth forecasts. Regarding the latter, the OBR said it had reduced its “central forecast for the underlying rate of productivity growth in the medium term to 1.0 per cent, 0.3 percentage points slower than in our March forecast.”

As for the Autumn Budget, the OBR said tax rises set to be outlined by Reeves would raise £26.1 billion by 2029-2030, the end of this parliamentary term.

The amount of fiscal “headroom” or wiggle-room that Reeves has to meet her own fiscal rules on spending and borrowing will rise to £22 billion by the end of the decade, the OBR said, far higher than the £10 billion or so that Reeves envisaged at her last budget.

CNBC has contacted the fiscal watchdog for further comment on the publication. Opposition leader Kemi Badenoch described the early release of the OBR report as a “complete shambles.”

— Holly Ellyatt

U.K. government borrowing costs fell on Wednesday after the country’s Office for Budget Responsibility unexpectedly released its economic and fiscal forecasts ahead of the Autumn Budget.

Yields on the benchmark 10-year gilt were last seen 4 basis points higher at 4.535%, after falling as much 4 basis points following the release.

The OBR was scheduled to publish its forecasts following the budget, which Finance Minister Rachel Reeves will deliver in parliament at 12:30 p.m. London time (7:30 a.m. ET).

Read more on this developing story here: UK government borrowing costs seesaw as official economic forecasts released early

— Chloe Taylor

It’s Nov. 26 and Autumn Budget day is finally here!

It’s been a longer-than-usual wait this year, with budgets usually delivered in late October. We’ve also had so much news flow on what tax rises could be included in Chancellor Rachel Reeves’ budget statement that it’s become hard to keep up.

This “kite flying” of policy proposals — designed to test public and market reaction to an idea before committing to it — has led to criticism of the Treasury, with analysts saying the near-constant drip feed of information (and the scrapping of policy ideas) has confused the public, businesses and markets.

It has also made it harder to gauge what we’re actually going to get when Finance Minister Rachel Reeves finally unveils her spending and taxation plans for the year ahead.

CNBC has taken a close eye on what we might see later today when Reeves unveils the Autumn Budget around 12.30 p.m. London time.

Read more: The UK’s Autumn Budget is coming: Here’s what it could mean for your money

— Holly Ellyatt

Speculation has been rife in recent weeks about the policy mix Reeves could deliver today. A tax raid is widely expected, with several potential sources of revenue hitting headlines in the U.K. recently.

Here’s a roundup:

Income tax thresholds could be frozen, drawing more Brits into higher tax bands as wages rise. Currently, the basic 20% rate of income tax only kicks in on earnings above £12,570 ($16,552). Annual earnings over £50,271 are taxed at 40%, while income above £125,140 a year is taxed at 45%. Anyone earning more than £100,000 has their tax-free allowance reduced at a rate of a £1 deduction from every £2 of income.  

A ‘mansion tax’ is another policy reportedly being considered by the Treasury, which would come as an annual council tax surcharge applied to homes valued at more than £2 million. London’s Evening Standard reported that 600,000 homes in the capital could fall into that threshold.

Private pension contributions and other salary sacrifice schemes — like Cycle to Work benefits — could also be targeted, with reports suggesting Reeves has been considering ending tax breaks for some of those programs.

Salary sacrifice currently allows workers to give up some of their earnings in exchange for a non-cash benefit, meaning it isn’t received as taxable pay and the employee pays less income tax and National Insurance. Rumors suggest Reeves could put a £2,000 limit on how much can be saved into a salary sacrifice scheme before National Insurance — a form of tax on income — applies.

Pension provider Fidelity said that under this system, someone earning £110,000 a year and sacrificing £10,000 into their pension would be liable for an additional NI bill of £160 a year, while their employer would have to pay an extra £1,200 a year.

A Gambling tax has also been floated in the U.K. press as a potential source of income for the government. Winnings from gambling are currently not taxed in Britain, and bets are exempt from VAT. There are already some industry-specific taxes in place, however, including duties of up to 25% on slot machines, a 15% tax on horse or dog races, and a levy of 21% on internet casino bets.  

Pay-per-mile taxes could be applied to electric vehicles, according to The Telegraph. EVs are currently exempt from fuel duty paid by people who drive vehicles fueled by gasoline.

Tourism tax has already been confirmed as a possibility, with Local Government Minister Steve Reed announcing Tuesday that mayors of English cities will be given the power to roll out duties on overnight stays.

Sugar tax will also be another source of additional revenue, with the existing duty on soft drinks with added sugar set to be broadened to include milk-based and milk-alternative beverages from 2028.

— Chloe Taylor

Markets are anticipating an increase in top-tier council tax, dubbed a ‘mansion tax,’ but some have issued warnings that it could slow down the U.K.’s housing market and have knock-on effects on trust in the Labour government.

“Both policies would disproportionally hit London and the South East and we maintain our preference for housebuilders with minimal exposure to these markets, such as Persimmon,” Jack Fletcher-Price, equity analyst at Morningstar, covering U.K. homebuilder stocks, said in a statement.

“The mansion tax has the potential to slow down transactions above the threshold, as logically owners would defer moving in the hope it will be repealed by a later Government,” he added.

The changes to council tax bands is probably overdue, Fletcher-Price said, “but it will further undermine trust in this Government given they promised not to do this in the run up to the election.”

— Tasmin Lockwood

U.K. Finance Minister Rachel Reeves is expected to announce a three-year stamp duty holiday for companies listing on the London Stock Exchange on Wednesday, with the widely-trailed move aimed at reversing the sharp slide in the number of companies publicly listing on the London Stock Exchange.

The measures will send a strong signal that the City of London is open for IPO business, according to Inigo Esteve, a partner at law firm White & Case.

“Stamp duty on share transfers is one of the remaining areas in which London differs from competing listing venues,” said Esteve, a partner in White & Case’s capital markets group.

“By removing this additional tax for investors in newly listed companies, the stamp duty exemption would hopefully help stimulate demand, attract more global capital and support valuations.”

Fundraising from London market debuts tumbled to a thirty-year low earlier this year.  

—Hugh Leask

Bond yields and prices move in opposite directions, so when investors are reluctant to lend to a government, the price of the bond falls and the yield rises.

The U.K. government currently has the highest borrowing costs of any G7 nation, with its 30-year gilt yield trading well above the critical 5% threshold and spending much of this year at multi-decade highs.

Dramatic rises in gilt yields — essentially the amount of interest the government pays on its debt — can also have a wider impact on the overall economy.

While bond yields reflect borrowing costs for the governments who issue them, they can also affect mortgage rates, investment returns, the wider economy and personal borrowing.

Back in 2022, Prime Minister Liz Truss’s swathe of unfunded tax cuts triggered a bond sell-off that had long-lasting effects on the economy and led to her resignation just 44 days into the job.

— Chloe Taylor

CNBC’s Ian King takes a fascinating look at Autumn Budgets past and present in his latest UK Exchange newsletter here: History lessons for Reeves ahead of UK’s much-hyped Budget

Here’s a snippet:

Could Rachel Reeves’ latest budget be the exception? We’ll see.

— Holly Ellyatt

“Rachel Reeves’ reckoning will come from gilt markets,” Nigel Green, chief executive of global financial advisory deVere Group, said in a note this morning.

Yields on U.K. government bonds — known as gilts — are edging higher ahead of the budget, with the yield on the benchmark 10-year gilt last seen 1 basis point higher at 4.509%.

Green noted that the policy unveiling today would not be the only potential source of volatility in British bond markets, with investors keeping a close eye on the Office for Budget Responsibility’s assessment of the economy, which will be released in tandem with the Autumn Budget.

“Today’s Budget speech is only the first act. The real judgement arrives the moment investors see the OBR’s updated revenue profile, growth assumptions and borrowing outlook,” he said. “The gilt market will decide whether the U.K.’s fiscal path is durable or whether the risk premium needs to rise.”

— Chloe Taylor

Investors will be keeping a close eye on the degree to which Chancellor Rachel Reeves will raise the amount of fiscal “headroom,” or wiggle-room, she has to meet her self-imposed “fiscal rules” on spending, borrowing and reducing debt by the end of the decade.

The rules were being met by a small margin when the Office for Budget Responsibility assessed them in March, but events since then mean that this headroom is likely to have disappeared, particularly in light of the OBR’s likely downgrade to productivity and economic growth, as well as U-turns on welfare spending cuts.

Jack Meaning, chief U.K. economist at Barclays, told CNBC that Reeves is likely to target a bigger fiscal headroom of £15-20 billion if she is to avoid having to again look for more money in the near-future.

“Certainly, when we’ve looked at it in the past, with something [fiscal headroom] as small as £10 billion that she had last time, that means there’s a one in three chance she’d have to come back for more tax increases or more spending cuts next time round. So I think probably £15 billion is the minimum the market is looking for,” he told CNBC’s Ian King on Wednesday.

Reeves’ current fiscal headroom of around £10 billion is viewed as istorically very low, “and that’s meant that the market has kept asking questions,” Meaning said.

— Holly Ellyatt

We already know one tactic the government will use to raise more money through taxes: a so-called milkshake tax.

The government confirmed on Tuesday that from Jan. 2028, some milk-based drinks will no longer be exempt from the U.K.’s sugar tax, a levy that’s added onto soft drinks with a high sugar content.

Currently, the tax is charged at 18 pence (24 cents) per liter on drinks with 5 grams of sugar per 100 ml, and 24 pence per liter on drinks with 8 grams of sugar per 100 ml — but it does not apply to milk-based and milk-alternative beverages.

When the changes come into effect, the charge will apply to pre-packaged milk-based or milk-alternative drinks like milkshakes, flavored milks, sweetened yogurt drinks and ready-to-drink coffees. The threshold will also be lowered, so that the tax kicks in once a drink contains 4.5 grams of sugar per 100 ml.

— Chloe Taylor

Markets will be watching the strength of sterling this morning as speculation ahead of the U.K. budget has led to put calls. The price of the currency will act as a real-time gauge on what investors make of the chancellor’s plan for Britain’s economy when she presents her taxation and spending plans later today.

Earlier Wednesday morning, the pound was up 0.18% against the dollar.

“Sterling appears to be in a no-win situation in regards to the budget,” according to Alpine Macro’s Chief Global Fixed Income and Currency Strategist Harvinder Kalirai.

“If Chancellor Reeves tightens fiscal policy, it will open the door for more easing by the [Bank of England]. Tight fiscal/easy monetary policy is a classic mix for a weaker currency,” he said. “If Reeves treads cautiously, then concerns over U.K. deficits and a rising debt burden should weigh on sterling.”

Leveraged investors have GBP shorts tied to the event, according to Daniel Tobon, head of G10 FX strategy at Citi. “Notably, despite worsening news on the budget and weaker U.K. data, GBP has failed to sell-off in recent weeks. This suggests a saturated short GBP position with the bad news likely priced in,” he said.

Citi had been targeting 0.88 for EURGBP into the budget, “and that target has been met but EURGBP has also failed to push higher despite numerous attempts,” Tobon told CNBC in emailed comments.

“Absent a negative shock in the budget, we see a greater risk of a ‘position squeeze’ (unwind of short GBP positions) and suspect some investors are already starting to unwind these short GBP trades as gilts fail to sell-off further.”

— Tasmin Lockwood

What Sanjay Raja, chief U.K. economist at Deutsche Bank, had to say ahead of the budget:

— Holly Ellyatt

Ahead of the chancellor’s critical statement — which could herald tax rises, spending cuts, or a combination of the two — fund managers are lining up high-conviction trades on U.K. housing, the British currency and beaten-down cyclical equities.

Take a closer look here: Three ways for investors to trade the budget

— Hugh Leask

“The budget effectively seems to be being driven by keeping the Labour party factions together and ensuring they can get whatever they do announce through parliament,” former Conservative U.K. Treasury Minister and Goldman Sachs Chief Economist Jim O’Neill told CNBC on Tuesday. 

Reeves’s past attempts to slash the U.K.’s welfare bill were watered down following a rebellion among some of the Labour party’s own lawmakers.

“I don’t have high expectations for it being an ‘oh wow, this is really getting to grips with things’ budget, but it will definitely be done to keep the fiscal rules on balance, at least for now,” O’Neill added.

— Chloe Taylor