Will John Healey’s ‘breathing space’ budget deliver what Britain needs? Our panel responds
Amid global economic storms, the new chancellor has promised to steer the course – with promises of more help to come. Will it be enough? Continue reading...
Will John Healey’s ‘breathing space’ budget deliver what Britain needs? Our panel responds Polly Toynbee , Hettie O'Brien , Rohan Sathyamoorthy , Kevin Cashman , Nik and John McDonnell Amid global economic storms, the new chancellor has promised to steer the course – with promises of more help to come. Will it be enough?
First, he did no harm. Then he scattered sprinkles of feel-goods. He told the truth about the state we’re in, deep in an extra £14bn of expensive debt , and, though he put it politely, at the mercy of the monster in the White House’s whims on Iran and tariffs.
The chancellor gave a gracious nod to his predecessor. He should be grateful, as she took the pain and he takes the gain for her £66.6bn in tax rises, in NI for employers and frozen income tax thresholds that slide by unseen, but yield mightily until 2031.
The public expected more personal taxes , according to Ipsos. It didn’t happen. Labour can take comfort that they think the Conservatives and Reform would both raise tax and cut public services.
Instead, help comes for their energy costs, one of the greatest causes of household debt, with bills set to rise brutally in January. Homes in council tax bands A-D get £100 and the VAT reduction has risen to £50, while abolished standing charges leave 60% of homes better off. But the rumbling discontent that has upended our politics since Brexit is easily explained by the unprecedented long fall in median household income , only in the last year rising back to levels six years ago.
Yet people’s priorities remain perverse: immigration stays top of their concerns, above inflation and the economy. Spending more on tougher border controls is second only to the NHS as the most popular expenditure. What do you do? Give in and let Shabana Mahmood be her harshest – or start telling people about the trade-off? Visas for work for another 200,000 migrants would bring the Treasury £18bn , says the Office for Budget Responsibility. Think what people could have for that.
Is this the “growth in every postcode and hope in every heart” Andy Burnham promises? No, not yet, not yet … Wait for his 10-year plan, spending review and an election with a new manifesto. And hope.
While Keir Starmer promised to tread more “lightly” on voters’ lives, interpreting political disaffection as a sign that people wanted to hear less from their politicians, Andy Burnham has interpreted this loss of faith as a demand for more political action. But there was always a risk that without a theory of power, his premiership would come to resemble the Downing Street equivalent of the TV show Rip-Off Britain, giving voters “everyday fixes”, starter ISAs and cheaper gherkins while failing to change the economy or society as a whole.
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The charitable reading of John Healey’s budget is that it was better than it could have been (and better than the Treasury, which briefed this as a “low-key” event, wanted us to expect). His energy package, including a £100 cut to bills for houses in council tax brackets A-D, will help ease the cost of living and should lower inflation. He also proposed a series of changes that should help to bring down energy bills in future. But there was no help for low-income renters, nor any plans for funding public services that are facing real-terms cuts . Bankers, meanwhile, will be breathing a sigh of relief after Healey imposed a temporary 6% tax on bank profits, below the pre-crisis level of 8%.
Researcher at Transition Security Project, a centre founded by Common Wealth and Climate and Community Institute
Just last month, the prime minister made the significant promise to “break with the direction of the past 40 years” and “build a new economy and a new politics”. John Healey’s budget, unfortunately, doesn’t do enough of either.
Department budgets were already slashed this summer to help finance the Ministry of Defence’s demand for an extra £15bn. Now, this budget adds £3bn more in cuts.
In July, Transition Security Project estimated that the defence investment plan, funded partly through £6.8bn in cuts, would result in more than 10,000 net job losses. With a further £3bn in cuts, those losses are now likely to exceed 15,000.
The reason is simply that military spending is a weaker driver of growth than the investment being sacrificed to fund it. Too much of the money leaves the country – flowing, especially, to the United States.
These cuts also undermine programmes that would help bring down the cost of living. The budget confirms a £1bn cut to Warm Homes, which supports heat pump grants. The additional help with household energy bills is welcome. But directing up to £5bn from the National Wealth Fund and British Business Bank towards defence reinforces the same misplaced priorities when these resources could have been invested in areas that help with living standards. Burnham does not have to accept these constraints. Healey has left the detailed funding route to the Nato spending targets until next year’s spending review. These targets – pushed by the US – imply a colossal transfer of wealth from the public to the military sector, amounting to £280bn in spending by 2035. Burnham should abandon these targets he inherited, which will steal more investment from every other department.
Healey was right that wars are driving up our energy bills and making Britain less safe. But let’s be honest about the role the government is playing. The US used British bases in its unprovoked attack on Iran, and our government is now backing Saudi Arabia’s war in Yemen. Diplomacy and de-escalation are part of a serious cost of living strategy – not bombing.
Look hard enough at this budget, and there are some signs that the chancellor is serious about bridging the age divide: an increase in tax for Britain’s banks, increased investment in apprenticeships and a new scheme for first-time buyers will be a welcome relief for many young and working people who are tired of bearing a disproportionate share of Britain’s economic burden. However, the limitations of even these mild reforms are already apparent: bank stocks rose conspicuously this morning on news that the rise would be temporary and only a mere three percentage points. And although the first-time buyer ISA will help young savers in the immediate term, in the long run it is only continuing to subsidise the housing crisis at the expense of the taxpayer, rather than intervening directly in the market to bring prices back down to an affordable level.
Furthermore, while pensioners, businesses, workers, women, carers, families and even nightclubs all received explicit support from Healey, outrageously absent was any real help for young people, nor any mention of the student loan crisis. The only mention of young people not in employment, education or training was made in the context of reforming welfare. Instead of addressing the problems facing young people and making clear that he would tackle intergenerational fairness, Healey made his priority clear, with “the biggest increase in defence spending since the end of the cold war”.
Ultimately, it will be impossible to fully judge this budget until we see the one that succeeds it. This “breathing space” budget will be beneficial only if it really is just that – buying time for the government to solve the painful, unignorable issues still crippling Britain’s young people: jobs, student loans, soaring rents. If the mixed rhetoric today is anything to go by, I won’t be holding my breath.
The chancellor said “hope starts with a home”, but for me, it’s the cost of my home that keeps me in poverty. I work multiple jobs just to pay my rent, and nothing in today’s budget will make that situation better. Where is the “breathing space” for families like mine, or hope for the future?
Families struggling through the storms of living on a low income deserve more than modest, micro-policies and everyday fixes to protect them from the incessant headwinds.
Extending the removal of VAT from electricity bills to next summer is being presented as help for households, but for rural families like mine, it offers little (or no) meaningful relief. I have no access to mains gas and can’t afford heating oil, so I depend on electricity to heat my home. Yet this measure does nothing to address the reality of living rurally without affordable alternatives. A record number of people now live in very deep poverty, with incomes that don’t cover the basics of food, housing or energy. We need meaningful, targeted support, not policies that offer some households a small saving while leaving others struggling to keep warm. In Cornwall, many homes rely on heating oil, and removing the kerosene tariff may help, but any savings depend on supplies holding up and suppliers passing them on.
The chancellor promised a distinctly Labour approach to welfare but I know many will feel incredibly fearful about the white papers to come later this year, after Alan Milburn and Stephen Timms deliver their reports on youth unemployment and disability benefits.
What we know from this budget is that families will be able to save about 40p on the weekly shop, assuming toffees and caramels are a part of your weekly essentials. Food poverty directly impacts health, productivity and social inclusion. I wish more had been done to help fill our fridges.
Labour MP for Hayes and Harlington. He was shadow chancellor for Labour from 2015 to 2020
The chancellor has called his budget a “breathing space” budget and that’s exactly what it is. It’s less a break with Keir Starmer, but hopefully the start of a step away.
The range of small-scale cost of living assistance offered on energy and food costs are all welcome elements of relief, but the harsh reality is that they provide an extremely limited breathing space.
The government has to be extremely careful that the goodwill that Andy Burnham’s arrival has generated does not degenerate into disappointment and disillusionment. Reform UK may have dipped in the polls but the rise of the far right in Germany, France and Italy demonstrates all too clearly where that disappointment can lead to.
This budget indicates to people that the government appreciates their concerns and is on their side, but it is absolutely critical that the time this budget may buy is used to demonstrate that it also has the plan needed to tackle the financial pressures people are under.
The government has committed to the large-scale capital investment programme in council housing, home insulation and alternative energy that can stimulate the growth promised in every postcode.
But there has to be demand in the economy too. That means putting money to spend in people’s pockets by modernising our taxation system to redistribute wealth and tackle the underinvestment in our public services, low pay and poverty that have held our economy back.
Nobody doubts the pressure John Healey has been under as a result of the crass geopolitical nightmares caused by Donald Trump’s attacks on Iran. Both Benjamin Netanyahu and Vladimir Putin have played Trump like a fiddle to their own advantage, and we are all now paying the economic price. With the potential change in the midterms, perhaps it’s also time for leaders to start talking less about defence spending and more about peace making.
