Chancellor Rachel Reeves has announced an increase in taxes in the Budget, which will raise the government’s fiscal headroom to £21.7bn and fund spending to bring down the cost of living for “working people”.
The statement, made in the House of Commons after the details were published early in error by the Office for Budget Responsibility, set out changes including a rise in the minimum wage and an electric vehicle (EV) mileage tax.
Here BBC London analyses what Reeves’s changes mean for the capital.
Working in the capital
Tens of thousands of workers in London will receive a pay rise from April due to an increase in the minimum wage, which the government announced ahead of the Budget.
The hourly rate for over-21s will rise by 50p to £12.71, with workers aged 18-20 seeing an 85p rise to £10.85, and under-18s and apprentices getting 45p more to £8 an hour.
In London, there are approximately 153,200 minimum wage workers aged 16 and over, according to the government’s 2024 statistics.
The highest number of those – 10,000 – work in Westminster.
London’s mayor Sir Sadiq Khan said the rise in minimum wage was “great news” for young people working in the capital.
Reeves argued the cost of living was still the biggest issue for working people but businesses warned that further increases to the minimum wages could result in hiring freezes.
She also said in her Budget that retail, hospitality and leisure businesses would see “permanently lower tax rates”, funded by higher rates on properties worth £500,000 or more.
Labour estimates this will benefit 111,000 business properties in the capital.
Budget 2025
BBC London’s work and money correspondent Meghan Owen said: “Businesses were nervous going into this Budget – particularly in the hospitality sector.
“Many are still reeling from last year’s national insurance contribution hikes and rise in national minimum wage – with smaller businesses telling me their profit margins are ‘razor thin’.
“While the blows to business are not quite the headlines we saw last year, this Budget still has not brought much comfort.
“Minimum wage will rise, particularly for younger people, and business rates will go up for businesses operating in properties valued higher than £500,000 – so a significant number of London’s West End businesses.
“As one café owner told me in central London: ‘It would be nice to have a break’.”
Michael Kill, chief executive of Night Time Industries Association, called the Budget a “hammer blow to the already fragile night-time economy”.
He said the rise in minimum wage would present a serious challenge for the sector and he was “deeply concerned” by direct and indirect tax increases.
London’s transport
BBC London’s transport and environment correspondent Tom Edwards says: “Reeves confirmed the government was backing plans to extend the Docklands Light Railway (DLR) to Thamesmead in the Budget.
“It would see a new line built from Gallions Reach to a new station at Beckton Riverside and then across the river to Thamesmead.
“The DLR extension is a significant infrastructure addition and will open up the area to redevelopment.
“It will be funded through Transport for London (TfL) and Greater London Authority borrowing.
“A new town of up to 25,000 new homes will emerge off the back of it, although it will take many years.”
