AUTUMN BUDGET 2025 – consumer credit sector reaction

Chancellor Rachel Reeves has announced the autumn budget for 2025.

Commenting on the Budget, Vikki Brownridge, CEO at StepChange said “Today’s announcement of the removal of the two-child limit is an immediate, cost-effective way to lift hundreds of thousands of children out of poverty. It is a decisive move that will reduce the risk of debt-related harm and ease pressure on thousands of families across the UK. Parents with more than two children, and single parents especially, are hit hardest by debt problems and struggle to keep up with essential bills. In 2024, one in ten StepChange clients (11%) had more than two children compared to 4% of UK households. So, this announcement is warmly welcomed.

“Help to Save is a vital policy for building financial resilience amongst some of those with the lowest incomes, and something StepChange has campaigned for. So, we’re pleased to get confirmation that the scheme will be expanded and made permanent. With over one in four StepChange clients being single parents, and knowing the financial impact of being a carer, any extension to help more people build rainy day savings – which can be what it takes to weather income shocks and avoid problem debt – is welcome.

“There’s more that can be done, though. As it stands, take-up of the scheme remains low, with just one in ten of those eligible using it. This means that many people are missing out on the support and the chance to build a meaningful income. We’d like to see auto-enrolment to Help to Save introduced, in a similar manner to pension auto-enrolment, to ensure all those who can benefit from the support can get it.

“News today that the OBR and Government expect council tax to rise 5% in April is unsurprising but yet another hit to households struggling to manage the rising cost of living.

“Council tax has become increasingly unaffordable, as we have seen arrears among StepChange clients double since the pandemic – the average council tax debt for our clients now stands at over £2,000 per client. Outdated regulations enable aggressive debt collection practices which exacerbate debt and leave households with little room to repay. The Government must act quickly to make the collection system fairer and more attuned to the difficulty millions of households are having in meeting their bill. The Government’s review of council tax collections must quickly bring in measures to address this.”

Robin Fieth, Chief Executive of the Building Societies Association, said “We recognise that the Chancellor has taken time to consider changes to the ISA regime, and are relieved that the reduction to Cash ISAs is less severe than the speculation at the beginning of the year. We are however, disappointed that the Cash ISA subscription limit has been lowered. It could also add more complexity, particularly around ISA transfers, and risks damaging the overall ISA brand.

“We welcome the steps taken to support those aged 65 or over. This group of savers could have been particularly affected by a lower subscription limit as they draw down their pensions or look to de-risk their investments. The decision to implement the changes in 2027, rather than rush them through for the next tax year, is also helpful.

“We are concerned about the additional 2% tax on savings interest. It penalises people who responsibly put money aside and build their own financial resilience. Coupled with the cut to the Cash ISA limit it disincentivises a savings culture and sends the wrong message.

“We have always supported the Chancellor’s ambitions to encourage more people to invest when it is right for them. However, the focus should be on helping people understand their savings and investment choice.”

Ben Mitchell, Director of Savings at Chetwood Bank, said “Many savers, especially those approaching retirement, will be disappointed to learn that today’s budget saw the cash ISA allowance cut after all. This decision will require many savers to reassess how they plan for the future, as cash plays an important role in supporting resilience during periods of market volatility.

“The Chancellor’s ambition to encourage more people into long-term investment is understandable, but making everyday savings less appealing or versatile doesn’t make life easier for working people. There is no guarantee that changing the ISA rules will lead to more money finding its way into other investment assets, such as stocks and shares. ISA rules have changed repeatedly over the years at the hands of different Governments. A better option would have been to look for simplification and stability.”

Damien Druce, Chief Operating Officer at Black & White Bridging, said “The Budget was a colossal missed opportunity.  We need to reform of our welfare system and tackle its ballooning bill.  The welfare state was intended to be a safety net for people who found themselves in difficulties or to provide help for those unable to work because of disability.  I was brought up on a council estate, in poverty; I’ve always strived for more based on hard work – not hand-outs.  The idea that living on benefits might become a way of life for generations of workless people would have been anathema to William Beveridge, the architect of the welfare state.

“But rather than reforming welfare entitlements, Ms Reeves is scrapping the two-child benefit cap, costing the country an additional £3bn.  Labour MPs have already scuppered an earlier attempt to reform Personal Independence Payments.  Given the Chancellor wants to cut debt, that meant more tax – and without an increase in income tax, that in turn meant raising more money from property.

“Ms Reeves should have reduced welfare spending, saving billions, keeping taxes down and boosting growth.  Sadly, that would have required vision, political will and leadership.  Which is something that Ms Reeves does not appear to possess.”

Dame Clare Moriarty, Chief Executive of Citizens Advice, said “Today’s budget will make a huge difference to the lives of the people we support. Scrapping the two-child limit and addressing high energy bills will prevent hundreds of thousands of children from growing up in poverty and help households across the country keep the lights on.

“Our advisers see every day the devastating impact that unnecessarily punitive policies and spiralling bills have had on households, like parents pushed into impossible choices between the food shop and topping up the meter.

“These commitments mark a vital turning point. We hope the Government continues in this direction, as there’s still more to do to ensure every household can live a life free from poverty.”