Victor Anderson says it looks like austerity is postponed until 2026 while the rich escape again
How you assess a Budget depends a lot on what you expected. The Starmer Government’s first few months were so disappointing that there were not many hopes on the Left that this would be a good Budget.
Anyone who has ever visited the posher parts of London, or any other British city, will know that “there is no money left” is a lie. The money is just in the wrong places and in the wrong hands. The Budget did very little to fix that basic problem, for example by introducing a wealth tax, and so in that sense cannot be counted as a good Budget.
However, it could have been far worse, either if the Tories had won the election or if some of the messages coming from Labour had been followed through. The closest to a neutral view of a budget can be gained from looking at the impact on government finances in the following full financial year (in this case 2025-26). This shows overall spending up £63.5 billion, taxes up £24 billion, and debt up £39.5 billion. So at least we have some additional government spending over the next few years to help repair the shameless running down of public services and infrastructure that took place under the Conservatives.
If “austerity” means a real terms cut or only very slight rise in public spending, it won’t be austerity this financial year or next. That is left for the years after, with rises below 1% planned for 2028-29 and 2029-30, despite the pressures of an ageing population and climate change. Starmer claims this will be managed through “efficiency savings”, although experience suggests that in practice usually means worse services for the public.
If you look at the detail of tax and spending changes it helps to cut through the media hype to compare the amounts of money involved in terms of impact on government finances. This shows what a big deal the freeze on fuel duty is (£3 billion lost to government in 25/26), bigger than any other tax change (e.g. on private schools) with the sole exception of employer’s national insurance (£23.8 billion). At the same time, the progressive £2 cap on bus fares will increase to £3, and in the main Budget document itself, we can see that the government money given to the railways is going to fall. The Tory bias against public transport has still not gone away.
Government spending plans are to some extent a test of the political influence of different lobbies. The powerful campaigning in the past that led to 0.7% of GDP going to overseas aid hasn’t been sustained, and it is still down at 0.5%, including within that money for refugees and asylum seekers in the UK. Defra’s money is increasing, but (there are no details on this yet) there is a question mark over whether the Environment Agency is going to get enough money to do its job properly, including crucially its monitoring of the state of water quality. The fossil fuel companies remain obviously powerful, having apparently secured a large slice of the money allocated to carbon capture and storage to enable them to continue to sell their products.
The Budget’s impact on economic growth is a puzzle. Despite all the talk about the very high priority the Government attaches to boosting GDP growth, the Office for Budget Responsibility forecasts growth this year at 1.1%, and only one year (2025) in which it gets to 2%, before falling below that again all the way to at least 2029.
This implies the Government is putting an awful lot of weight on its planning reforms as the means to boost growth. The Planning and Infrastructure Bill is not yet published, and we still don’t know what it will do to carbon emissions, nature, or the rights of citizens, but there must be suspicion that some of the things people most value could be traded away for GDP gains. If growth was the solution to poverty, poverty would have disappeared centuries ago. But economic growth is what politicians have to hope for if they want to see public services restored but are not prepared to make the rich pay more in taxes.