By Salma El-Sakka
The first Budget under Prime Minister Andy Burnham is expected soon, with households across the country waiting to see how planned fiscal changes will affect them. Inflation rose to 3.5 per cent in September, the highest level in nearly a year, driven by rising energy costs.
Pension Changes
Burnham's pledge to revise the state pension triple lock would not take effect until 2030 at the earliest, but could save £15bn per year by 2040 according to official estimates. The state pension is set to rise 3.9 per cent in April to £13,036, pushing it above the £12,570 income tax personal allowance for the first time. Chancellor John Healey is expected to raise the tax-free allowance to £13,036 for low-income pensioners, ensuring those relying solely on the state pension do not pay income tax on it.
Private Pension Tax Relief
Recurring speculation suggests the government may cut pension tax relief for high earners to a flat 20 per cent, regardless of income tax bracket, potentially saving around £15bn annually. There are also calls to reverse former chancellor Rachel Reeves' plan to subject salary-sacrificed pension contributions above £2,000 to national insurance from 2029, though the Treasury has not commented.
Benefit Reforms
Major changes to the benefit system are likely to be announced after the Budget. Ministers are reportedly considering cuts to disability benefits for younger claimants, limiting Personal Independence Payment eligibility on mental health grounds, and removing the health element of universal credit for claimants under 25 — a group of over 250,000 people. PIP could be replaced for under-25s or overhauled entirely. Burnham has said his government will not pursue "crude cuts," but may face pressure from MPs if spending reductions are too sharp. Any welfare savings are reportedly earmarked to fund employment support for young people out of work or education.
