Rachel Reeves announced the abolition of the controversial two-child benefit limit as the centerpiece of a budget that raises £26 billion in taxes while promising to reduce living costs for millions of families. The policy announcement came against the backdrop of a major embarrassment when the Office for Budget Responsibility accidentally published the complete budget documentation an hour before the chancellor’s Commons speech, triggering immediate financial market reactions.
The chancellor presented her fiscal plan as a necessary recalibration of government finances combined with strategic investments in Britain’s future. Reeves argued that her approach would create a fairer society while maintaining economic stability through careful management of public spending and revenue generation. She emphasized that every measure was designed to build long-term prosperity rather than pursuing short-term political gains.
The decision to scrap the two-child benefit restriction marks a significant policy victory for anti-poverty campaigners and represents Labour’s largest social policy intervention since taking office. The measure will immediately improve living standards for 450,000 children, addressing concerns that have dominated internal party discussions for months. Government analysis indicates this action, combined with related welfare reforms, will achieve unprecedented reductions in child poverty rates within a single parliamentary term.
Tax increases form the financial foundation of the budget, with personal taxation bearing the largest burden through a three-year extension of frozen tax thresholds contributing £15 billion. The chancellor also introduced a £2,000 cap on salary-sacrificed pension contributions beginning in 2029, alongside higher gambling taxes, new distance-based charges for electric vehicles, and a premium council tax rate for high-value properties. These measures collectively address a £4 billion fiscal gap and establish a comfortable £22 billion buffer against government borrowing rules.
Reeves balanced tax increases with targeted cost-of-living support, including a £150 annual reduction in energy bills through the removal of environmental levies and frozen prices for rail travel, motor fuel, and prescription medications. These interventions are projected to reduce inflation by 0.3 percentage points from its current level of 3.6%—the highest among G7 nations and significantly above the 2% target. Despite these positive measures, economic growth forecasts show a downward revision for 2026 from 1.9% to 1.4%, though government borrowing is set to decline from 4.5% of GDP to 1.9% by 2030-31.