Chancellor Rachel Reeves is set to unveil a highly anticipated and controversial Budget this week, featuring a series of proposed tax increases targeting multiple sectors of the economy. The measures aim to fund welfare commitments—such as potentially scrapping the two-child benefit cap—and address a multi-billion-pound public finance shortfall. However, critics warn the proposals could hinder economic growth, depress private savings, and undermine the UK's financial stability.

A central feature is a proposed raid on middle-class pensions, specifically targeting 'salary-sacrifice' schemes used by millions of private-sector workers. This policy, reminiscent of Gordon Brown’s infamous pensions raid, is projected to raise £3–4 billion by limiting the amount employees can sacrifice from salaries into pensions without paying National Insurance. Experts describe the plan as a “hammer blow” to private-sector pensions, already trailing public-sector arrangements.

The Confederation of British Industry (CBI) called the move "a tax on doing the right thing," noting many businesses would struggle to absorb the shortfall, potentially cutting workers’ pension pots by thousands. Former work and pensions secretary Sir Iain Duncan Smith warned it would be a “huge hit on savings” for middle-income earners, while former pensions minister Sir Steve Webb echoed the sentiment, highlighting the negative impact on retirement funds.

The Budget is also expected to include an increase in alcohol duty, with industry leaders bracing for a 4.3% rise. This could translate to a 15p increase on a bottle of red wine, 47p on Scotch whisky, and 7p on a four-pack of lager. Miles Beale of the Wine and Spirit Trade Association described it as a "depressing prospect" for an already challenged sector.

The Chancellor’s plans have sparked wider concerns about UK economic stability. Former Bank of England chief economist Andy Haldane warned of a “vulnerable moment” for the economy, while former Tory chancellor Kenneth Clarke cautioned that tax rises without spending restraint could trigger a financial crisis. The CBI’s chief, Rain Newton-Smith, urged the government to prioritize growth over revenue-raising measures, noting that taxes alone are "bound to fail."

These proposals arrive amid a reported billionaire exodus, with high-net-worth individuals such as steel tycoon Lakshmi Mittal, Revolut founder Nikolay Storonsky, and property magnates Ian and Richard Livingstone relocating due to changes in inheritance tax and the ending of the 'non-dom' regime. Observers warn this could weaken the UK’s appeal as a global financial hub.

Despite the controversies, some relief measures are included: the state pension will rise by £550 next year under the Triple Lock, rail fares will be frozen for the first time in 30 years, and support is expected for energy bills. Reeves is also targeting a £1.2 billion reduction in benefit fraud and error, while Labour MPs continue pushing for the scrapping of the two-child benefit cap, a move costing £3.5 billion.

The Budget is a delicate balancing act, navigating competing demands from unions, businesses, and the public. With calls for a “living standards budget” from the TUC and spending restraint from the CBI, Reeves faces a pivotal moment as she attempts to reconcile fiscal responsibility with social commitments amid growing scrutiny from businesses, economists, and citizens alike.