Increasing unemployment creates more challenges for Rachel Reeves
The increase in UK unemployment is bad news for the chancellor, Rachel Reeves as she heads towards the Autumn Budget, say leading audit, tax and business advisory firm, Blick Rothenberg.
Robert Salter, a director at the firm, said: “The Office for National Statistics (ONS) latest report shows that the unemployment statistics for the period to August 2025 have continued to show an increase in unemployment with approximately 297,000 more people unemployed compared to the same time last year.”
He added: “The increase in joblessness only raises the financial pressure on Rachel Reeves as she tries to ‘plug’ the fiscal black hole in the country’s budget. While there has been no official announcement as to the size of this black hole, economists have been suggesting that it could be as high as £30bn.”
Robert said: “The ongoing increase in unemployment is a real financial and emotional strain for those individuals and their families directly affected by the job losses. But unfortunately, this also increases the likelihood of Ms Reeves having to raise additional taxes on ‘working people’ to help manage the fiscal pressure she is under. The chancellor faces a ‘double-whammy’ of lower income tax receipts through Pay As You Earn (PAYE) and National Insurance Contributions (NICs) and an increase in the need to pay additional social benefits to the unemployed.”
He added: “It is difficult to say exactly how much such a significant increase in the number of unemployed will cost the country and it will depend upon a very wide range of factors including individuals’ historical earnings levels and the amount of social support to which they would be entitled when unemployed.”
Robert said: “However, an example total cost of £7bn to the government, via a reduction in income tax and NICs and the need to fund additional social benefits, would be broadly equivalent to a 1p on the basic rate of income tax.”