The run-up to this Budget has been the most chaotic and elongated in recent history. But at least it’s over. The Chancellor has promised we will move to a single annual OBR forecast going forward. This is a welcome relief.
An unappetising Smorgasbord
As usual, our team maintained a running tracker of Budget speculation. Sophie Bowman, who oversees this analysis, quantified the pre-Budget swithering: our initial tracker began at 13 pages containing 25 speculated measures. By yesterday, it had swelled to 38 pages and 44 measures. The Deputy Speaker rightly admonished the Government for the unprecedented airing of policy in advance.
The result, as delivered in the Chancellor’s statement, was a smorgasbord of measures designed to raise revenue piecemeal. Meanwhile, fiscal drag continues to pull more working people into the higher and additional rate bands. While Rachel Reeves can claim she adhered to the letter of the Labour manifesto, it certainly won’t feel that way to the working aged electorate. The tax burden is forecast to rise to over 38 per cent of GDP by the end of this Parliament, a new high.
What’s on the menu next?
Fiscally, the UK is in a tight position, though not a catastrophic one. Debt and deficit levels are not unusual by G7 standards, and the Chancellor deserves credit for maintaining headline budgetary control. However, growth remains anaemic, and bond markets are wary. With a substantial majority and most of a parliamentary term still ahead, the Government nevertheless has a workable platform.
The critical weakness remains a lack of coherent political strategy. In recent months, the Government has thrown more people at economic policymaking, yet the result has been increased confusion rather than clarity; the “guiding mind” behind the policy is difficult to discern.
It is notable, then, that Reeves repeatedly insisted this Budget represented her choices. If true, the focus of her attention has clearly shifted. The Government spoke relentlessly of its growth mission. And indeed, there has been progress on the supply side, with welcome news on airport expansion, nuclear power, and planning reform.
However, the centrepiece of today’s announcement seemed aimed squarely at the Labour base: increases in welfare payments funded by higher taxation of middle income and wealthier individuals.
Ultimately, then, one can ask: what was today’s Budget actually for? If the goal was a tactical exercise to buy some time for another relaunch, it might succeed. But as an articulation of how Starmer and Reeves intend to transform the country, then it doesn’t convince.
Full analysis in the report.
John Rowland, CEO
H/Advisors Cicero