Sensemaker Will the Budget bring the cost of living down?
Nov 27, 2025
Tim Leunig, an economist and former economic advisor to the UK government, dives deep into Chancellor Rachel Reeves's budget aimed at reducing living costs. He explains the delicate balance of funding through increased taxes and the impact on inflation, energy bills, and other essentials. Tim highlights the significance of raising minimum wages and the potential removal of the two-child benefit cap to alleviate child poverty. He also discusses the uncertainties of projected economic improvements and how external shocks could affect the plan's success.
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Energy Savings Are Tax-Funded
- Rachel Reeves aims to cut household energy bills by shifting some charges from bills to general taxation.
- That reduces bills but raises taxes elsewhere, so overall public finances simply redistribute the cost.
Rail Fare Freeze Shifts Costs
- The rail fare freeze for 2026 will cost taxpayers at least £145 million and may also reduce railway investment.
- The full impact depends on whether rail operators absorb some costs, which remains unclear.
Youth Minimum Wage Raises Employer Costs
- Raising the minimum wage for 18- to 20-year-olds to the full adult rate will significantly raise employers' costs when combined with national insurance changes.
- This makes hiring younger workers more than a third more expensive than before the election.