Joe Shalam is policy director at the Centre for Social Justice.
Andy Burnham will make fitted sheets easier to fold, slash Chinese takeaway waiting times, and make digestive biscuits less vulnerable to a dunk into hot tea. So say the headlines circulating on TikTok. However enjoyable, the teasing betrays a more sympathetic reading from voters of the new Prime Minister’s approach so far, who has opted for small but tangible improvements that people can immediately understand.
John Healey’s first Budget tried to follow the same pattern. There was extra cash for paternity leave, another fuel duty freeze, even tariff reliefs from boiled sweets to baked beans. In total, 98 policy measures were announced – a record number.
More interesting politically, however, was the flexing of the post-Starmer regime’s Left-populist muscles. Banks, vape shops and gambling businesses were the Budget’s bogeymen. Hard-up billpayers, small businesses and rough sleepers its heroes.
A BBC push alert to some seven million people read: “Millions to get £100 energy payment this winter and bank tax to temporarily rise from 3% to 6%”. In short, tax the banks to cut your bills. Ministers will have been pleased to see the populist case distilled so neatly and authoritatively given the polling of these policies.
Let’s be clear-eyed here, this is a dangerously compelling proposition that Conservatives will struggle to counter by arguing, however reasonably, the case of the banks or energy companies.
Indeed, on the whole, this was a cleanly executed fiscal event. No Truss-style market meltdown. No panicked Reeves-style pre-budget press conference. Healey drew new battle lines on Labour’s chosen ground, and the Prime Minister continues to build credit with different parts of his coalition. The right should recognise there is a new opponent in town.
But if the Chancellor, to use his phrase, was able to buy some breathing space for himself and this Labour government, how much has he bought for Britain?
Not much, by the look of the numbers. Growth next year has been cut from 1.6 to one per cent. Real household disposable income per person is forecast to fall by 0.8 per cent this year. Debt interest payments are set to hit £160 billion by the early 2030s.
Yet just as worryingly, the Budget dodged some of the most urgent questions facing our economy and society.
Take our creaking welfare system. Legislation must wait yet another year, following the Milburn and Timms reports, despite 6.7 million people now claiming out-of-work benefits – around one in six working-age adults – up 2.3 million since 2020.
Funding the commitment to spend three per cent of GDP on defence by 2030 must await the 2027 spending review. Social care remains with the Casey Commission, while material savings from scrapping the triple lock to pay for the PM’s care plans will not arrive until the late 2030s.
One thing was clear, however. Workers will pay more tax. The total take is set to pass its post-war record next year, reaching 38.6 per cent of GDP by 2031–32. Personal tax receipts will be dragged further upwards to the tune of £17 billion extra a year by 2030–31. And the impact on work incentives of frozen thresholds is predicted to cut the labour supply by the equivalent of 215,000 workers.
As the tax burden bulges, there is real danger now of growing resentment between those paying ever more into the system and those who rely on it the most. Public attitudes towards the generosity of benefits have hardened, while there is clear support for restricting eligibility for conditions like anxiety and depression. Leaving a failing system unreformed risks eroding support for the safety net itself.
Meanwhile, nearly a million young people are stuck out of work or training. For them, another year of delay means lost experience, confidence and earnings. These are the years in which people should be taking their first steps towards independence.
Still, the reviews themselves can only take us so far. Milburn’s interim report identifies £8 billion spent on key benefits for 16–24-year-olds, a tiny drop in the oceanic welfare bill. Timms has committed to stick to the OBR’s projections for future expenditure. Ministers will need to look beyond these reviews to address the broken incentives across the system if they are to get a handle on the soaring benefit bill.
After all, there is an enormous economic prize from getting this right. Milburn’s analysis estimates that, had every NEET been in full-time work last year, Britain’s output would have been £38 billion higher. Human potential is being scandalously wasted – and this week was another missed opportunity to begin to turn the tide.
As for the Tories’ response, Badenoch’s observation that reversing 40 years of neoliberalism had produced “4p off gherkins” enjoyably exposed the gap between Labour’s rhetoric and the everyday fixes approach. But Conservatives will need a sharper response to combat a Left-populism with real electoral appeal. They, too, must show how a party under new leadership would improve lives in a tangible way.
The darkening global backdrop could expose the limits of Labour’s approach sooner than ministers expect. Further escalation in Iran would put renewed pressure on the forecasts. A £15 billion margin against the fiscal rule offers limited protection from another shock.
While the Westminster rumour mill is in overdrive, Burnham denies preparing for a snap election. But even if he is not planning to revisit the tax promises he inherited from the manifesto of Starmer and Reeves, events (dear boy) may well force his hand.
In any case, this week’s Budget was an enormous fudge. No10 should be grateful for the breathing space Healey has bought them. But workers facing higher taxes and young people losing another year to worklessness have fewer reasons to be cheerful. An election promising neatly folded sheets, faster takeaways and dunkable biscuits may well be Mr Burnham’s next trick.
After this Budget, the hard choices will still be waiting.