For new Chancellor John Healey, Wednesday delivered a Budget with his boss’s fingerprints throughout. It included a Fiscal Devolution Roadmap giving mayors a share of income tax, the largest council housebuilding programme since the post-war era, a 3.9% increase to the National Minimum and Living Wage, and a flurry of immediate cost-of-living measures focused on energy and fuel. All key priorities for Manchester-ism and Mr Burnham.
This was a safety-first Budget. With no rises to the main rates of tax, no welfare cuts, and Treasury analysis showing the lowest-income households gaining most, Labour MPs will have little to rebel over as they sell these measures on the doorstep. Survation’s recent MRP identified 160 seats in the Red Wall “surge zone”, with Labour recovering around 11 points over Reform since Burnham’s takeover. It is exactly these voters that the Budget’s package of smaller, everyday interventions will seek to target.
But the Office for Budget Responsibility (OBR) figures suggest there is a much more challenging picture ahead. The tax burden is forecast to reach a record 37.9% of GDP. Living standards will only be around 2% above pre-pandemic levels by 2030-31. Healey’s £15bn margin against his fiscal rule is about half the average since 2010, and the OBR predicts only a 56% chance of this target actually being met.
Popular targets like the banks may have been hit, but key decisions on billions wrapped up in welfare reform, defence and social care were all deferred to an already delayed spending review, beyond perhaps even a general election. The future of the global economy looks even more uncertain after the US mid-terms and where they will leave Trump on Iran, so Healey’s caution may yet prove shrewd. But equally, Kemi Badenoch’s attack that Burnham “promised to end 40 years of neoliberalism” and delivered “4p off gherkins” will also stick.
At best, Healey may have given the Prime Minister a platform to put his priorities at the heart of government, but this was also a Budget characterised by for some, “continuity-Starmer” policy tinkering rather than real reform. Burnham after all promised in his conference speech to tackle head on the big systemic challenges that recent UK governments have ignored – failing utilities, under resourced public services, the real terms impact of Brexit for business.
The rest of this parliament cannot simply therefore be about preparing for the next; otherwise, Labour’s “lost first term” will undoubtedly be matched by a lost majority in its second. An early election may suit Downing Street pollsters but could play disastrously with an electorate that wants a government simply to get on with the job. Burnham’s risk is that he leads an administration long on social media rhetoric, but short on lasting impact.
The task for No10 is to create a sense of momentum. Labour is enjoying its highest ratings of this parliament, while the Conservative recovery also marks a return to the more familiar dynamic of the two largest parties dominating political discourse. At least for now, populist turbulence is on the wane. There is real advantage to be captured then if voters can begin to stitch together Burnham’s values and these initial policy moves to a much bigger framework capable of delivering real transformation. Time is ticking for Labour finally to produce its own “long-term economic plan”.
Next year will be a key test. With major choices on defence, welfare and social care postponed, not resolved, expectations for the Comprehensive Spending Review will be high. Early engagement with government will be particularly important for businesses seeking to influence it.
