Fresh in the wake of the Government’s first distinctly Labour Budget, MHP assembled an expert panel for their reaction, and what Labour’s approach means for the future.

Panellists included: 

• Jonathan Ashworth – Chief Executive of thinktank Labour Together and former Labour MP who held the Shadow Health, Work and Pensions, and Paymaster briefs. 
• Daisy Cooper MP – Liberal Democrat Deputy Leader and Treasury Spokesperson 
• Mark Percy – Co-Head of Corporate Advisory, Shore Capital 
• Alison Phillips – Former Editor of the Daily Mirror and MHP Senior Adviser 

Here are our five key takeaways from the discussion: 

1. The run-up to the Budget was mishandled

If there’s one thing we know in a post-Truss world, it’s that the markets like certainty. By leaving such a long time between the election and their first budget, the Government opened the floodgates for rampant speculation over worst case scenarios come the Autumn. In fact, Government gilt yields fell during the budget, symptomatic of the UK’s financial centre breathing a sigh of relief that the budget was not “as bad” as had been speculated. The sharp rise in gilt yields as Rishi Sunak took to his feet in the Commons was not what the Government hoped to see, and Reeves has since been on a mission to reassure investors that Britain is open for business. The public mood is similar: though the long wait for the budget brewed inertia and hiatus, there is relief that fuel duty freezes remain untouched, and tax thresholds were unfrozen. This initial relief is a short-term political win for Labour; whether it will transfer to a sense of sustained political goodwill is less certain. 

2. Productivity and upskilling are key

Though the NHS has received a big uplift in funding, it has come with several requirements for efficiency improvements, and privately Wes Streeting and Rachel Reeves are stressing that pushing productivity in the public sector is essential. Employment rates have not rallied since the pandemic, and there is a big risk for young people who are out of work and education. Along with productivity, therefore, skills are the key to pushing through Labour’s growth agenda. There is concern over the lack of focus on lifelong learning and apprenticeships, especially in the construction sector. Labour wants to stimulate growth through de-regulating the planning system, but will struggle with the lack of builders in the country. Whilst some suggest a closer relationship with the EU, others argue that upskilling the domestic workforce is more of a priority for the Government. 

3. NHS reform and a healthy country are in the Government’s sights

Investment in the NHS is the backbone of this budget and provides insight into the psychology of Treasury decision makers. The cash injection has been widely welcomed, but concerns have been raised over long-term plans for our health service. Opposition parties have raised the lack of focus on social care provision, highlighting that providing better social care provision would get more people back to work. With the dawn of Ozempic, there is an increasing recognition that life sciences are going to play a large part in making the UK healthier, and Peter Kyle (the Secretary of State for Science and Technology), will likely be given a larger role to develop the newest technology to tackle health issues keeping Britons out of work, thus increasing productivity. There is a general view that with £22bn of investment, Reeves has increased the NHS supply; the work now begins to dampen the demand. 

4. Business choices matter

The success of this budget in stimulating growth now sits, to an extent, with businesses across the country. With rises to the National Minimum Wage and employers’ National Insurance contribution, the choice between passing on these costs to consumers or employees will be crucial to the long-term economic picture. Over the next few months markets are watching to see whether passing costs on to customers pushes up inflation whilst keeping one eye on unemployment and the effect it has on consumer confidence. The public are expecting inflation to come down and if their pay packets take a hit due to their employer’s National Insurance bill increasing, they will not be happy with the Government. 

5. The future is still uncertain

Starmer’s team are gearing themselves up to fight the next election on the NHS and economy, and are taking the view that backlash over scrapping the Winter Fuel Allowance and rising bus fares will be forgotten by the time it comes to vote again, if there are signs the NHS is turning around and the cost of living has eased. The Government will be concerned by the Office for Budget Responsibility (OBR)’s projections of low growth, and the next few months will see an acceleration of previous plans to cut red tape around planning and slash the country’s benefit bill to try and beat the measly predictions. At the same time, Secretary of States will be fighting for spending settlements for the remainder of the Parliament, and there will be more policy trade-offs to come. The long-term effect of the budget’s policies is yet to be seen, but the Government has set out a clear sense of direction- it’s certainly more old Labour than New. 

Following the Budget, MHP’s Public Affairs team stands ready to support your business needs. Contact [email protected] to speak with our team of expert political advisers.