Natacha Tannous Ritchie is a Conservative councillor in Kensington and Chelsea (Pembridge Ward) with a background in finance.
On the campaign trail in 2024, Labour promised that its energy policies would reduce household bills by £300 a year. Yet two years later, bills are £368 higher and, in John Healey’s first budget, the Chancellor is only offering £100 to selected households – a figure which is £568 short of their 2024 commitment. Are we supposed to celebrate?
Of course, £100 is better than nothing. But a one-off, selective sop is not a permanent reduction in energy costs. And this sums up the Budget rather well: politically skilful yet economically insipid and harmful.
Higher electricity costs affect households directly and businesses indirectly, as increased production costs are passed onto consumers. Ending Labour’s costly net-zero obsession would help address the underlying problem of high energy bills, particularly when the UK accounts for only around 1 per cent of global CO₂ emissions.
Even if the UK eliminated all of its emissions, we would be committing economic suicide, only to become more dependent on imports from countries such as China, where manufacturing is more carbon-intensive. We would simply be exporting our industries, importing increased carbon emissions and becoming more dependent on countries like that of China. To make matters worse, the OBR forecasts inflation of 3.5 per cent in 2027, up from 2 per cent expected in March, largely due to higher energy prices. Yet rather than tackling energy costs at their source, the Government is postponing its Cost Control Framework until 2027.
If the Budget has failed to deliver on Labour’s manifesto energy pledge, it is far from the only difficult decision that has been deferred rather than resolved. Healey missed his chance to tackle welfare spending, defence funding and the deficit.
The Chancellor told the House of Commons that ‘we will bring down the welfare bill, and we will do it in a Labour way’. Given that the OBR has forecasted welfare spending rising from £333.8bn this financial year to £431.3bn in 2031-32, perhaps the phrase ‘in a Labour way’ should be translated to mean ‘an increase of £100bn’.
Health-related welfare spending is expected to reach 3.2 per cent of GDP by 2031–32, with health and disability benefits forecast to rise from £85.6 billion to £120.2 billion. We need a safety net and must protect those who genuinely cannot work. But living on benefits should not become a business plan for those who can work, simply because Universal Credit and other benefits can make not working more financially rewarding than working. What is Labour’s plan? Once again, more reviews, conveniently scheduled to report after the Budget: the Timms Review on disability benefits and the Milburn Review on youth unemployment, followed by a White Paper in 2027.
But the prevarication which amazes the most is over defence. John Healey resigned as Defence Secretary because he believed the Government’s funding settlement was inadequate and would make Britain less safe. For this, he brought down a Prime Minister. In his first budget, he had the power to make good on what he had condemned. Yet he failed miserably.
The Budget postpones the detailed pathway to spending 3 per cent of GDP on defence by 2030 and 3.5 per cent by 2035 until, yes, you guessed it, yet another review: the 2027 Spending Review. The Government has funded its existing Defence Investment Plan (DIP) through £4.7bn of ‘capital reallocations’: a word to make servicemen and women shudder. Worse still, the Telegraph has revealed that the MoD’s budget allocation will be £1bn in the next two financial years. Were Healey’s principles stronger somebody else controlled the money?
As for jobs, over the last two years, Labour has been determined to introduce anti-business policies, from their (un)employment legislation (Employment Rights Act), to the employer’s NIC increases and lower NIC threshold. Now the Chancellor has announced yet another increase – of 3.9 per cent – in the National Living Wage, to £13.21 an hour, with the rate for 18–20-year-olds rising to £11.27.
In fact, the Budget does little to address the fundamental problem facing young people: they need to have a job before they can benefit from higher wages! Businesses employ people when they can afford to do so. If employment costs rise faster than productivity, employers can only respond through higher prices, lower profits, shorter hours, or lower recruitment, especially of untested workers. The OBR expects businesses to pass more of these costs on to consumers as they rebuild their profit margins.
Whilst the Government itself acknowledges the Milburn Report’s finding that nearly a million young people are not in education, employment or training (NEETs), Healey, like his predecessor at Number 11, has decided to make employment less affordable for business and does not seem to understand that businesses cannot absorb unlimited costs. As for the targeted business-rates relief, it merely offsets some of the costs businesses face rather than addressing the underlying pressures driving those costs up.
Whilst this Budget has been characterised chiefly by inaction, when the Chancellor has acted, it has been for the worse. Healey hiked the tax on savings and property income, with rates from April 2027 reaching 24 per cent for the basic rate, 44 per cent for the higher rate, and an eye-watering 49 per cent for the additional rate. Britain does not need further disincentives to save and invest. And these policies will have perverse outcomes for housing. By reducing the return on rental property, you discourage supply in our already constrained market and push up rents.
Labour seems determined to punish any industry or individual with the temerity to succeed. Battling against the headwinds from the pandemic, our financial services sector has enjoyed bumper overseas business and bank earnings. The Chancellor’s response? Doubling the Bank Corporation Tax Surcharge from 3 per cent to 6 per cent, for 15 months from 1 January 2027 to 31 March 2028. Healey is no exception to the Work and Pensions Secretary Pat McFadden’s complaint that ‘every meeting I have is: ‘Who can we tax in order to pay benefits to others?’
Behind the Chancellor’s announcements, the OBR’s figures are hardly reassuring. Growth of just 1 per cent in 2027. Inflation of 3.5 per cent. No real earnings growth. Real household disposable income per person barely exceeding by the end of the decade. At 97.3 per cent of GDP, public debt, meanwhile, threatens to exceed the country’s whole national income, while fiscal headroom stands at just £15 billion in 2029–30. Our tax burden is forecast, in 2031-32, to reach 38.6 per cent of GDP – its highest level since records began in 1948.
This Autumn, Britain expected a Budget that would confront its economic challenges. Instead, the Government delivered an underwhelming package, increasing borrowing while failing to tackle the deficit. Unlike Howe or Lawson, who took decisive action in their first Budgets, Healey deferred the difficult decisions. Welfare reform? Next year. Defence funding? Next year. Energy reform? Next year. Economic strategy? Still to come.
Tinkering around the edges will not steer Britain’s economy back into safer waters.
This inconsequential Budget may buy Labour time, but it does nothing to resolve Britain’s structural problems. And despite Burnham’s denials, one cannot help wondering whether it was designed to pave the way for an early general election.
Natacha Tannous Ritchie is a Conservative councillor in Kensington and Chelsea (Pembridge Ward) with a background in finance.
On the campaign trail in 2024, Labour promised that its energy policies would reduce household bills by £300 a year. Yet two years later, bills are £368 higher and, in John Healey’s first budget, the Chancellor is only offering £100 to selected households – a figure which is £568 short of their 2024 commitment. Are we supposed to celebrate?
Of course, £100 is better than nothing. But a one-off, selective sop is not a permanent reduction in energy costs. And this sums up the Budget rather well: politically skilful yet economically insipid and harmful.
Higher electricity costs affect households directly and businesses indirectly, as increased production costs are passed onto consumers. Ending Labour’s costly net-zero obsession would help address the underlying problem of high energy bills, particularly when the UK accounts for only around 1 per cent of global CO₂ emissions.
Even if the UK eliminated all of its emissions, we would be committing economic suicide, only to become more dependent on imports from countries such as China, where manufacturing is more carbon-intensive. We would simply be exporting our industries, importing increased carbon emissions and becoming more dependent on countries like that of China. To make matters worse, the OBR forecasts inflation of 3.5 per cent in 2027, up from 2 per cent expected in March, largely due to higher energy prices. Yet rather than tackling energy costs at their source, the Government is postponing its Cost Control Framework until 2027.
If the Budget has failed to deliver on Labour’s manifesto energy pledge, it is far from the only difficult decision that has been deferred rather than resolved. Healey missed his chance to tackle welfare spending, defence funding and the deficit.
The Chancellor told the House of Commons that ‘we will bring down the welfare bill, and we will do it in a Labour way’. Given that the OBR has forecasted welfare spending rising from £333.8bn this financial year to £431.3bn in 2031-32, perhaps the phrase ‘in a Labour way’ should be translated to mean ‘an increase of £100bn’.
Health-related welfare spending is expected to reach 3.2 per cent of GDP by 2031–32, with health and disability benefits forecast to rise from £85.6 billion to £120.2 billion. We need a safety net and must protect those who genuinely cannot work. But living on benefits should not become a business plan for those who can work, simply because Universal Credit and other benefits can make not working more financially rewarding than working. What is Labour’s plan? Once again, more reviews, conveniently scheduled to report after the Budget: the Timms Review on disability benefits and the Milburn Review on youth unemployment, followed by a White Paper in 2027.
But the prevarication which amazes the most is over defence. John Healey resigned as Defence Secretary because he believed the Government’s funding settlement was inadequate and would make Britain less safe. For this, he brought down a Prime Minister. In his first budget, he had the power to make good on what he had condemned. Yet he failed miserably.
The Budget postpones the detailed pathway to spending 3 per cent of GDP on defence by 2030 and 3.5 per cent by 2035 until, yes, you guessed it, yet another review: the 2027 Spending Review. The Government has funded its existing Defence Investment Plan (DIP) through £4.7bn of ‘capital reallocations’: a word to make servicemen and women shudder. Worse still, the Telegraph has revealed that the MoD’s budget allocation will be £1bn in the next two financial years. Were Healey’s principles stronger somebody else controlled the money?
As for jobs, over the last two years, Labour has been determined to introduce anti-business policies, from their (un)employment legislation (Employment Rights Act), to the employer’s NIC increases and lower NIC threshold. Now the Chancellor has announced yet another increase – of 3.9 per cent – in the National Living Wage, to £13.21 an hour, with the rate for 18–20-year-olds rising to £11.27.
In fact, the Budget does little to address the fundamental problem facing young people: they need to have a job before they can benefit from higher wages! Businesses employ people when they can afford to do so. If employment costs rise faster than productivity, employers can only respond through higher prices, lower profits, shorter hours, or lower recruitment, especially of untested workers. The OBR expects businesses to pass more of these costs on to consumers as they rebuild their profit margins.
Whilst the Government itself acknowledges the Milburn Report’s finding that nearly a million young people are not in education, employment or training (NEETs), Healey, like his predecessor at Number 11, has decided to make employment less affordable for business and does not seem to understand that businesses cannot absorb unlimited costs. As for the targeted business-rates relief, it merely offsets some of the costs businesses face rather than addressing the underlying pressures driving those costs up.
Whilst this Budget has been characterised chiefly by inaction, when the Chancellor has acted, it has been for the worse. Healey hiked the tax on savings and property income, with rates from April 2027 reaching 24 per cent for the basic rate, 44 per cent for the higher rate, and an eye-watering 49 per cent for the additional rate. Britain does not need further disincentives to save and invest. And these policies will have perverse outcomes for housing. By reducing the return on rental property, you discourage supply in our already constrained market and push up rents.
Labour seems determined to punish any industry or individual with the temerity to succeed. Battling against the headwinds from the pandemic, our financial services sector has enjoyed bumper overseas business and bank earnings. The Chancellor’s response? Doubling the Bank Corporation Tax Surcharge from 3 per cent to 6 per cent, for 15 months from 1 January 2027 to 31 March 2028. Healey is no exception to the Work and Pensions Secretary Pat McFadden’s complaint that ‘every meeting I have is: ‘Who can we tax in order to pay benefits to others?’
Behind the Chancellor’s announcements, the OBR’s figures are hardly reassuring. Growth of just 1 per cent in 2027. Inflation of 3.5 per cent. No real earnings growth. Real household disposable income per person barely exceeding by the end of the decade. At 97.3 per cent of GDP, public debt, meanwhile, threatens to exceed the country’s whole national income, while fiscal headroom stands at just £15 billion in 2029–30. Our tax burden is forecast, in 2031-32, to reach 38.6 per cent of GDP – its highest level since records began in 1948.
This Autumn, Britain expected a Budget that would confront its economic challenges. Instead, the Government delivered an underwhelming package, increasing borrowing while failing to tackle the deficit. Unlike Howe or Lawson, who took decisive action in their first Budgets, Healey deferred the difficult decisions. Welfare reform? Next year. Defence funding? Next year. Energy reform? Next year. Economic strategy? Still to come.
Tinkering around the edges will not steer Britain’s economy back into safer waters.
This inconsequential Budget may buy Labour time, but it does nothing to resolve Britain’s structural problems. And despite Burnham’s denials, one cannot help wondering whether it was designed to pave the way for an early general election.