Budget 2026: An uninspiring step sideways

0

At 12:30 on Wednesday 28^th October, Chancellor John Healey took to the dispatch box to announce what he called ‘’A budget for working people.’’ It is hard to find much in to object to on substance: the measures are generally modest, sensible, and by recent budget standards cheaply funded.  

However, the outlook coming into this budget looks bleak. The OBR projects no growth in real earnings next year and a slight fall in real household disposable income. Real income growth per person over the past decade has been the weakest since the 1960s and the OBR expects little improvement. The tax burden remains historically high, and all the while a global storm of security concerns, with Russia at its centre, rages on. In these circumstances a budget of small gestures is not neutral; it is a decision to stick one’s head in the sand.  

Nowhere is that clearer than in defence. Mr Healey resigned from former PM Keir Starmer’s cabinet as defence secretary over what he argued was inadequate funding for the defence investment plan stating that Britain should spend of 3% GDP on defence by 2030 as a firm target with a fully costed root of achieving this. Now as the Chancellor, he has committed to fully funding the plan but has laid out no clear pathway to achieve it instead gesturing to ‘’innovative financing’’ methods a plan that, like my bank balance after another round at the Old Firehouse, is fine so long as nobody looks too hard. 

In these circumstances a budget of small gestures is not neutral; it is a decision to stick one’s head in the sand. 

Growth is another issue. The IFS warned before the budget that a ‘’steady-as-she-goes’’ approach was not open to the chancellor, and that the big decisions could not wait for the next year’s spending review. Sadly, this is exactly what has happened, headroom has fallen to £15 billion from £23.6 billion in March, the tax burden is heading for a historic 38.6% of GDP. The one measure aimed at business investment arguably goes the wrong way with the main write down allowance on equipment and machinery cut to 12% taking one billion pounds a year even after a higher first year allowance. These decisions do not go away by being put off they simply get more expensive 

However, there are a few things this budget gets right, and one of them is on gambling. Mr Healey has raised machine games duty from 20% to 25% on higher stakes machines and the money is to support a package to reinvigorate the High Street. Gambling harm is real and asking more of the industry that profits from it is undoubtedly a fair choice. Additionally, a threshold exempting pub and seaside arcades, so the extra costs fall on the higher stakes ends of the market rather than the businesses that depend upon it for casual trade is well placed. Sadly at £150 million a year it is not a game changer, but it is for once a step in the right direction rather than a step to the side. 

So where does this leave us? Largely where we started. Earnings remain stagnant, the tax burden remains historical high, whilst security becomes increasingly problematic. Nothing in this budget is particularly offensive or even particularly political. Nevertheless, this government has a significant majority, even if it wasn’t won by its current figurehead, and with it a mandate to act. A government must use it political capital to make choices. I may recommend a strong and well-funded defence budget at the cost of elements of our welfare budget, members close to Mr Burnham may prefer to hike taxes but either way this massive majority must be used to make decisive action.