Chancellor John Healey presented a Budget that lacked radical new ideas, opting to postpone tough decisions instead. While he avoided frightening bond markets, the plan relies heavily on a draft Ten Year Plan. Government spending remains at a peacetime high of 46 per cent of GDP, worrying many business owners.
There were few hints of any radical new future in Healey's speech, which was a depressing postponement of tough decisions
Every now and again, someone will gloomily remark that maybe we need a "crisis" to wake the country up. This is said quietly, in private conversations. But business owners feel so ground down that some fear nothing will get better unless we hit some kind of wall. Personally, I think you should be very careful what you wish for. But what this week's Budget made clear is that Britain is in an unsustainable holding pattern, with a great deal riding on a government Ten Year Plan which is still being drafted.
The Budget was an unflashy, professionally handled affair. There was no damaging kite-flying in the run-up. The new chancellor, John Healey, is a seasoned operator with a nice line in self-deprecating humour. While he added a record number of infuriatingly fiddly changes to the scorecard, he didn't frighten the bond markets. Despite having worked at the Treasury under Gordon Brown, he didn't pull a surprise "rabbit" announcement out of the hat. He is the perfect straight-man to our new prime minister, whose relaxed and witty appearances on social media and Celebrity Gogglebox are watched by far more people than the Budget. Andy Burnham is extremely good at retail politics. Taxing the banks to give poorer households £100 off energy bills was a classic "I feel your pain" gesture. It was a nasty side swipe at banks but at least it was affordable, unlike Liz Truss's gargantuan energy support package.
This double act feels more solid than Brown and Blair, or Reeves and Starmer. Numbers 10 and 11 are now in lockstep. Since Burnham took over, Downing Street has become a notably more dynamic, focused place. Considerable activity is being devoted to thinking through devolution and civil service reform. These might waste a lot of money or they could prove transformative.
There were few hints of any radical new future in the Budget, which was a depressing postponement of tough decisions that need to be taken if we are not to end up in a spiral of ever higher taxes funding an ever-bigger state. The prime minister rails against "neoliberalism", but it doesn't feel like we have had much of that for some time. Government is now spending around 46 per cent of GDP, a peacetime high outside of the pandemic. In 1995 it was around 38 per cent of GDP. The latest tax rises -- on banks, savers and landlords -- come on top of the steady drag of more earners being caught in higher bands by continued freezing of income tax thresholds. This stealth tax, originally a temporary measure, has been extended again. There is no indication that this government has any serious intention to halt the steady creep of tax and spend, let alone reverse it. Nor that there is any sense of urgency about economic growth.
The Budget did seem to signal a new direction on energy policy, with a slight shift from clean power to cheaper power. And there were some encouraging measures on AI investment. But it also made the tax code even longer. The minimum wage will rise again, even after a rise of 26 per cent in the past two years. The planning system remains sclerotic.
Are we frogs in boiling water, hoping that something may turn up, grimly accepting the OBR's new forecasts that the deficit will be higher, and growth next year even lower than expected? The day after the Budget saw an unedifying war of words between the BBC and the Treasury, insistent that the chancellor had not meant to suggest, in an interview, that he would reduce the welfare bill before the next election.
Over all of this hangs a sense of waiting. For the Milburn and Timms reviews on welfare. For some kind of public-private partnership to fund defence. And for clarity about the prime minister's "theory of growth". Why did Burnham and his allies mount a coup against Keir Starmer if they didn't have a plan? Was there anything in MPs' minds, other than hoping to save their seats with a more charismatic leader?
To be fair, Downing Street is working on two approaches to grow the economy. One is some kind of EU rapprochement -- though that will be in Brussels' gift, not ours. Another is devolution, which Burnham has thought long and hard about. Much depends on whether he insists on his "good growth in every postcode" mantra, or accepts that boosting growth means crowding serious investment into a few places with the skills and capacity to use it.
It also means accepting that some areas may fail. In the first of a series of papers on the economy, the former Treasury insiders John Kingman and Shriti Vadera make a strong case that city devolution could drive economic growth in England. They also note that embracing proper devolution means "embracing difference, uncertainty, risk . . . and the probability of unequal outcomes"; this Whitehall has historically been reluctant to do.
The work going on behind the scenes could suggest that Burnham is only just getting his teeth into things, and wants to stay the course. Or it could be about drafting the manifesto for an early election. It could make sense to gamble while Labour is enjoying a poll bounce and the right is split. Moreover, the tough departmental settlements in the forecasts for the end of the parliament are unpalatable for today's Labour Party. On the other hand, it's risky to call an election when people don't feel better off. The truth is that Burnham probably hasn't decided.
What is there to do but wait? This was Labour's third Budget, yet crucial decisions have been postponed again. The only way out is a radical unleashing of economic growth. But we are in a holding pattern.