"What has it got in its pocketses?"

John Healey’s first budget this week was something of a riddle: the fiscal fireworks of Rachel Reeves’ £66bn tax-raising budgets were largely absent with only £5.5bn of tax hikes and any giveaways modest and targeted. We all know that there are ambitious spending commitments looming with a 3% target for defence spending by 2030, the creation of a new National Care Service and the Prime Minister’s vision of implementing the biggest council housebuilding programme since the post-war era. There was however precious little to deal with our long-term fiscal issues, kickstarting economic growth and getting to grips with the welfare bill. So what was this “breathing space” budget all about?

Forecasts show that there will have to be deep cuts to public spending over the coming years and funding the Prime Minister’s various projects will need to tap an already stretched tax base. The Office for Budget Responsibility’s forecasts show that net public debt will still be at 96% of GDP by 2031/32 with recent governments’ plans to consolidate borrowing perpetually postponed. At the same time, the OBR forecasts show continued stagnation in living standards, with real household disposable income only 1% higher than at the beginning of the Covid pandemic.

If this Parliament runs its course, then Andy Burnham will be going to the country in 2029 on a combined promise of welfare cuts and tax rises – surely not a compelling way to win a majority where most opinion polls today point to a hung parliament. It feels that much has been left for the Comprehensive Spending Review, due at some point in 2027 but crucially potentially running beyond the next general election. Some say that this points to an early election, but whatever the approach, it certainly allows difficult decisions to be delayed once more. This budget certainly seems to be more of the same: deferral and indecision.

The political class seems incapable of breaking this cycle and it’s clear to me that the fragmentation we see in our politics is due in large part to the electorate’s frustration with persistently weak economic growth, an increasing tax burden and associated issues such as immigration. Attempts to address “cost-of-living” pressures, while certainly welcome to many as an interim measure, fail to deal with the underlying economic issues and risk distorting the narrative of what the actual problems are and the measures needed to fix them. The Chancellor might think that his budget has given himself and his new boss some breathing space to come up with an economic strategy for the country but I wouldn’t bet against the answer to “what has it got in his pocketses” to be “not much at all…”