Responding to the 2025 Autumn Budget, Ryan Shorthouse, Executive Chair of Bright Blue, said:
“The Chancellor came out fighting, making some bold and necessary tax decisions that her predecessors ducked, such as introducing a new pay-by-mile tax regime for motorists, raising Fuel Duty in line with inflation and increasing Council Tax for more expensive properties. However, a lot of these taxes will come later in this Parliament, necessitating higher borrowing in the near-term. The design of these tax reforms also needs to be rethought.
“Overall, though, the fundamentals of our economy will not change: we still have rising taxes and spending, and growth in our economy and living standards are forecast to effectively flatline for the rest of this decade. Whether you’re cutting spending or increasing taxation, you are imposing austerity. The 2020s are still a decade of austerity. In fact, as tax levels reach record levels – the majority of which is falling on working people – and inflation and interest rates remain higher than they did in the last decade, more people will feel they are living in austerity today than was the case ten years ago.
“Just as the Tories were wrong in the last decade to balance the books by disproportionately cutting spending relative to raising taxation, the Labour Government is making the reverse mistake. There is no serious attempt to cut government spending. In fact, there are unnecessary and unjustifiable increases in public spending, such as freezing rail fares and extending free breakfast clubs to all primary schoolchildren. And so, worryingly, net public debt will rise to 96% of GDP by the end of this decade; twice the level of an average advanced economy.
“Working taxpayers and government bond investors who are paying for all this public spending are voting with their feet: turning away from Labour, turning away from the country, turning away from British bonds. A confident performance today will give the Chancellor some temporary respite, but Labour Ministers are still too scared of their own shadows, unwilling to do what is right for our country above what is popular in the polls.”
The 2025 Autumn Budget adopted eight Bright Blue policies:
- Removing the two-child limit on benefits.
- Narrowing the gap in tax rates between income from work and income from rent, dividends and savings.
- Increasing the proportion of face-to-face assessments for PIP.
- Moving green levies from domestic energy bills onto general taxation.
- Lifting the freeze on the value of fuel duty.
- Increasing the number of Council Tax bands for more expensive properties.
- Introducing pay-per-mile taxation for drivers of Electric Vehicles (EVs).
- Extending the Sugar Tax to a wider range of products.
Taxation
- A 2p increase on tax rates on dividend, rental and savings incomes at both the ordinary and upper rates.
- A freeze on the thresholds for payment of different rates of Income Tax and National Insurance from 2028 to 2031.
- Extending the freeze on Inheritance Tax thresholds until April 2031.
- Reducing Capital Gains Tax (CGT) relief on disposals to Employee Ownership Trusts (EOTs) from 100 to 50%.
- Decreasing the main rate of writing-down allowances for Corporation Tax to 14% from April 2026.
- Increase eligibility on Enterprise Management Incentives (EMIs).
- Introducing a high-value Council Tax surcharge on properties worth over £2 million.
Ryan Shorthouse, Executive Chair at Bright Blue, commented:
“About two thirds of the increase in taxation we will experience for the rest of this parliament will fall on working people, through the extension of the freezes on the thresholds for paying different rates of Income Tax and National Insurance.
“The Chancellor had choices: she could have shifted more of the weight of taxation on consumption, for example by broadening the base of VAT, or by at least attempting to make some significant cuts to public spending.”
Bartek Staniszewski, Head of Research at Bright Blue, commented:
“It is good to finally see some willingness to reform the incredibly inefficient and regressive Council Tax, but this new surcharge on very expensive properties creates steep cliff edges that will inevitably distort the market. Property taxation reform more generally needs to be far more ambitious to be effective.
“Labour rightly committed to doubling the size of the UK’s exceptionally productive mutuals sector – of which a lion’s share is constituted by Employee Ownership Trusts (EOTs) – but has done little to achieve this. On the contrary, this measly tax raid will seriously hurt the formation of new EOTs, even despite the expansion of Enterprise Management Incentives.”
Savings
- Reducing the annual ISA cash limit to £12,000 for savers under 65, while keeping the overall annual ISA limit of £20,000.
Dr William Prescott, Senior Research Fellow at Bright Blue, commented:
“The Government is right that equities generally offer a better return than cash, and to nudge ISA savers accordingly by effectively bringing back the Maxi and Mini ISAs of the 2000s. However, to protect young people who need access to emergency liquid savings, or are saving for a house deposit, the government should create a carve-out for a higher cash ISA limit for younger people, not just over 65s.”
Pensions
- Capping NIC relief on salary sacrifice into pension schemes to the first £2,000 of pension contributions per person from 2029.
- Removing access to the Class 2 Voluntary National Insurance contributions (VNICs) for individuals abroad and increasing the initial residency or contributions requirement for VNICs to 10 years.
- Increasing the state pension by 4.8%.
Dr William Prescott, Senior Research Fellow at Bright Blue, commented:
“The right balance has to be struck between incentivising private pension contributions for adequate retirement, and ensuring a disproportionate amount of tax breaks cannot be captured by higher-income groups. The Government will need to review carefully whether £2,000 per year achieves that balance.
“With an ageing population and public debt nearing record peacetime levels it is entirely reasonable to stop foreigners who only live a short time in the UK from purchasing discounted access to the state pension.
However, if the government were truly serious about controlling public spending, it would re-assess the triple lock on the value of the basic state pension – even means-test it – so that the very wealthiest no longer receive handouts they clearly don’t need.”
Social security
- Removal of the two-child limit within Universal Credit from April 2026.
- Increasing the national minimum wage for 18-to-20-year-olds to £10.85 an hour.
- Reducing VAT relief on and excluding luxury brands from Motability.
- Increasing the proportion of face-to-face assessments for PIP.
Bartek Staniszewski, Head of Research at Bright Blue, commented:
“Getting rid of the two-child-limit will give Starmer’s Government some leeway with the Labour left and afford him more political capital to push on with much-needed welfare reforms, which he needs to move quickly on. More importantly, it is also right that family life should be open to everybody, no matter their income, especially given the UK’s abysmal birth rate.
“Eligibility for Motability and Personal Independence Payments (PIP) were symbolic of the inefficiencies and abuses of the UK’s social security system. Stricter conditionality is the right intention, but arbitrarily declaring some car brands luxury is not the best way to achieve it.
“Due to the impacts of COVID, AI and last year’s employer’s National Insurance rise, young people in the UK are already struggling to enter employment. As Bright Blue has long argued, it is risky to make them more expensive to hire by working towards a single wage floor for all adults, regardless of age.”
Energy and environment
- The freeze to and the 5p cut in fuel duty will be extended until September 2026, with the 5p cut being reversed through a staggered approach thereafter.
- Fuel duty rates will be increased in line with RPI from April 2027 onwards.
- Introducing Electric Vehicle Excise Duty (eVED).
- Investing an additional £100 million in EV charging infrastructure.
- Introducing a ten-year 100% business rates relief for EV chargepoints.
- Extending by one year the 100% first year allowances (FYAs) for zero-emission vehicles (ZEVs).
- Additional £1.3 billion funding for the Electric Car Grant.
- Removal of green levies from domestic energy bills.
Joe Harrison, Senior Researcher at Bright Blue, commented:
“Removing green levies from domestic energy bills and refunding electricity suppliers for legacy Renewables Obligation costs delivers a rare and welcome boost for the UK’s stagnant living standards, both lowering bills and reducing inflation.”
Cyril Davydenko, Researcher at Bright Blue, commented:
“The Chancellor’s renewed freeze on fuel duty is regressive, disproportionately favouring higher earners, though concerns are partly eased by the plan to reverse the 5p cut from September 2026. It is a belated and brave move.
“The introduction of the eVED pay-per-mile tax for electric vehicles is a progressive measure that will begin to offset the decline in fuel duty and vehicle excise revenues brought about by the growing demand for EVs.
“Additionally, further support for EV charging stations is a welcome step that will help alleviate consumers’ concerns regarding range anxiety and availability of charging points.”
ENDS
Notes to editors
To arrange an interview with a Bright Blue spokesperson or for further media enquiries, please contact Ryan Shorthouse at ryan@brightblue.org.uk or on 07754 672233.
- Bright Blue is the independent think tank and pressure group for liberal conservatism.
- Bright Blue’s board includes Diane Banks, Philip Clarke, Alexandra Jezeph, Richard Mabey and Ryan Shorthouse.
- Our advisory council can be found here. We also have 107 parliamentary supporters. Members of our advisory council and our parliamentary supporters do not necessarily endorse all our policy recommendations, including those included in this press release.
