OBR warns Budget leaves UK ‘vulnerable’ as tax burden hits all-time high

Wednesday 26 November 2025 13.45

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Britain’s public finances are in a vulnerable position, Britain’s fiscal watchdog warned in Rachel Reeves’ damning Budget decision.

In a report coincidentally published before the Budget was announced, the Office for Budget Responsibility said that Reeves’ spending plans saw Britain spending more on debt interest than at almost any period in post-war history.

LIVE Budget: Follow the latest updates on the City AM live blog.

“While this Budget addresses some fiscal risks and increases margins against the government’s fiscal targets, it still leaves the UK’s public finances relatively vulnerable to future shocks,” the OBR said.

“Even if the government complied with its fiscal rules and reduced borrowing across the board… this would only reduce the UK deficit to levels that advanced economies had reached on average just a few years ago.

“This would leave the UK with a debt-to-GDP ratio around twice the developed country average and the sixth highest among developed countries.”

Tax burdens hit record highs

The warning comes as the OBR forecasts that the tax burden will reach an all-time high in the economy’s history by the end of the decade, as more Britons are drawn into paying higher tax rates.

Taxes as a share of GDP are expected to rise from 35 per cent in 2024-25 to an all-time high of 38 per cent in 2029-30 and beyond, the OBR said. This would be 5 percentage points above pre-pandemic levels.

“Around two-thirds of the increase in tax receipts since 2019-20 has come from personal tax increases – mainly due to the previously announced threshold freeze and employer NIC increases, as well as the package of personal tax increases in this Budget,” the OBR said.

The freeze in income tax brackets means an additional 10 million people will be dragged into higher rate brackets by the end of the decade compared with 2023, the OBR said.

This number consists of 5.2 million people who will be required to pay tax, 4.8 million people who will be included in the higher rate group, and an additional 600,000 people who will pay the additional rate.