Every year the Chancellor steps up to deliver the Budget and, if we’re honest, most of us switch off pretty quickly once the headlines fade. Yet every now and then one comes along that people still argue about decades later – usually because it hurt, surprised, or simply changed everything.
Today, November 26 2025, Rachel Reeves walks into the Commons knowing her statement will be dissected for years. Her first Budget last Halloween still stings in boardrooms for the £25 billion employers’ national insurance raid. Now her second arrives trailing warnings of frozen thresholds, stealth taxes, and the biggest fiscal tightening in a generation.
History is watching. And history, as we’ll see, is not always kind.
Why Most Budgets Fade – And a Few Haunt Us Forever
Think about it. Can you name five Budgets from the last twenty years without Googling? Most people struggle past two or three. The truth is the vast majority vanish from collective memory almost before the red box snaps shut.
Yet a select handful refuse to die. They become shorthand for economic turning points, political bravery, or spectacular misjudgement. Geoffrey Howe’s 1981 masterpiece. Nigel Lawson’s 1988 triumph-that-wasn’t. Gordon Brown’s 1997 pension disaster. These are the ghosts that still rattle around Westminster whenever a Chancellor starts talking about “tough choices”.
And right now those ghosts must feel very close indeed.
1981: The Budget That Ignored 364 Economists
Picture Britain in early 1981. Inflation tearing along at 15%. Unemployment heading fast toward three million. The new Thatcher government already deeply unpopular inside its own party.
Into this storm stepped Geoffrey Howe with a Budget that raised taxes by what was then an eye-watering £4 billion – equivalent to roughly £20 billion today. He froze personal allowances (hello fiscal drag), hammered duties on drink, tobacco and petrol, slapped a windfall tax on banks enjoying high interest rates, and even taxed the new North Sea oil bonanza.
Conservative MPs walked out. Three hundred and sixty-four economists – a who’s-who of the profession including a future Bank of England governor – wrote an open letter declaring there was “no basis in economic theory or supporting evidence” for the policy. They predicted social collapse.
“The time has come… to save the nation’s finances from ruin.”
– Geoffrey Howe defending his 1981 measures
They were wrong. Painfully wrong. Inflation was crushed, interest rates eventually tumbled, the pound fell from its crippling heights, and British industry got the breathing space it desperately needed. Most historians now regard it as the pivotal moment that made the 1980s boom possible.
Funny how history flips the script.
1988: When Tax Cuts Overheated Everything
Fast-forward seven years. Nigel Lawson – fresh from sweeping corporation tax reforms – decided Britain could afford some fun. He slashed the top income tax rate from 60% to 40% and the basic rate to 25%. Champagne corks popped in the City.
There was just one problem. Monetary policy was already loose, credit flowing like water, and Lawson chose that exact moment to phase out mortgage interest relief. The result? A frantic last-minute house-buying spree that poured petrol on an already blazing housing market.
Even Margaret Thatcher later admitted it was “at just the wrong time”. The boom turned to bust, interest rates rocketed to 15%, and the early 1990s recession scarred a generation. A Budget remembered, sadly, as the one that lit the fuse.
1997: The £250 Billion Pension Raid Nobody Saw Coming
Gordon Brown’s first Budget as Chancellor looked clever on the day. Windfall tax on privatised utilities – popular. Corporation tax cut – business cheered. VAT on fuel reduced – voters smiled.
Then, almost as an afterthought, he abolished the tax credit pension funds received on dividends. His argument: it would encourage companies to reinvest profits rather than pay them out.
The actual outcome was catastrophic. Over the next two decades the move stripped an estimated £250 billion from pension funds. Final-salary schemes became unaffordable overnight. Companies closed them to new members and eventually to future accrual. Millions of private-sector workers born after about 1960 woke up to dramatically poorer retirement prospects.
Perhaps most ironically, business investment never got the promised boost. And UK pension funds – once owning half the stock market – now own around 4%. A single paragraph in a July Budget that quietly rewrote retirement for an entire generation.
So What About Today?
Reeves faces a uniquely poisonous combination: stagnant growth, markets demanding fiscal credibility, and a public sector screaming for cash after fifteen years of restraint. The Office for Budget Responsibility has apparently handed her a £20-£40 billion black hole depending on which forecast you believe.
The whispers are getting louder. Frozen income tax thresholds for years ahead – classic stealth taxation. Possible alignment of capital gains tax with income tax rates. Changes to inheritance tax reliefs. Maybe even tweaks to pension tax relief or another look at those defined-benefit scheme loopholes.
Employers still haven’t forgiven last year’s national insurance hike. Another turn of the screw there would be political dynamite. Yet borrowing costs remain stubbornly high – gilt yields refuse to play ball – and investors want to see those fiscal rules treated as holy writ.
- Keep markets calm = tax rises or spending brutality
- Keep voters calm = protect working people (whatever that now means)
- Keep Labour MPs calm = pour billions into public services
Pick two. You can’t have all three.
In my view the most telling detail is the return of threshold freezes – straight out of the 1981 playbook. When inflation is running ahead of allowances, the Treasury makes money without anyone noticing they’ve technically raised tax rates. Politically invisible, fiscally irresistible.
“The British people elected us to fix the foundations… and that requires difficult decisions today for working people to prosper tomorrow.”
– Echoes of every Chancellor since 2010
We’ve heard versions of that line before. The question is whether this difficult medicine actually works this time, or whether we look back in ten years and file Reeves 2025 alongside the great cautionary tales.
Markets Are Nervous – And Rightly So
Gilt yields have been climbing for weeks. The pound wobbles every time another tax rumour leaks. Fund managers talk openly about “buy the rumour, sell the fact” trades around Budget day.
They remember Liz Truss. They remember that markets can punish perceived fiscal incontinence in hours, not years. Reeves has spent months insisting her fiscal rules are non-negotiable, yet every independent forecast shows day-to-day spending rising faster than the economy itself can grow.
Something has to give.
The Political Trap
Most Chancellors get several bites at the cherry. Reeves might get two, maybe three if Labour wins again in 2029/30. That concentrates the mind wonderfully. Do the painful stuff early and hope growth returns to take the credit later? Or spread the pain and risk permanent reputation as the austerity chancellor?
History suggests the first option is the only one that ever gets forgiven.
Howe was loathed in 1981 and knighted later. Lawson was lionised in 1988 and resigned in disgrace eighteen months afterward. Brown surfed the wave of 1997 optimism and paid the price when the bill finally arrived in 2008.
There is, in short, no safe path.
Final Thoughts on a November Afternoon
As I write this, rain is lashing Downing Street and the TV networks are running their countdown clocks. In a few hours Rachel Reeves will stand up and try to thread the narrowest of needles – fixing the public finances without breaking the recovery, taxing wealth without scaring investment, investing in growth without spooking the bond vigilantes.
Most Budgets are forgotten by Christmas. Some are remembered forever.
By tonight we’ll know which category this one falls into.
And somewhere in the ether, Geoffrey Howe is probably smiling quietly. He knows exactly how she feels.
