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Newsletter issue – February 2026
Chancellor Rachel Reeves is reported to have already used up to £3bn of the £22bn fiscal headroom she set out in her November Budget. The spending is linked to a series of U-turns and concessions made since the Budget was announced. Sir Mel Stride, the Conservative shadow chancellor, is urging Ms Reeves to clarify whether her March spring statement will effectively become a mini-Budget due to these changes.
A major U-turn involves scrapping the plan to end Covid-era business rate relief. Treasury sources estimate the cost at around £300m, focused mainly on pubs. Other sources claim the cost could be as high as £2.4bn, depending on whether support extends beyond pubs to shops, cafés, and other high-street businesses.
The Business Secretary, Peter Kyle, admitted that they did not know what the full impact of the Budget changes would be beforehand because the Government didn't have access to information about planned business rates revaluations set to hit the hospitality sector. This has led to the decision reversal.
Meanwhile, rejoining the EU's Erasmus scheme is estimated to have cost more than £500m, while changes to inheritance tax to exempt more family farms are expected to cost £200m.
