Is this play-safe budget a sign that the prime minister is planning an early election? | Larry Elliott

Great hopes were invested in Andy Burnham when he became prime minister in July. He went big on the failings of 40 years of neoliberalism, emphasised the need for Britain to start making things again and promised growth in every postcode.

Back in the summer, John Healey’s first budget was seen as an opportunity to start delivering on these ambitions, but it has been clear for some time that it wouldn’t do so. The road to the New Jerusalem – judging by the chancellor’s “breathing space” package – will be a slow and arduous one. Healey has taken what he inherited from Rachel Reeves and performed some minor tweaks. Not so much a revolution as continuity Keir Starmer.

As has been the hallmark of Burnham’s first 100 days in Downing Street, there was plenty of activity in the budget but the slew of measures – almost 100 in all – was a hotchpotch and had no real semblance of a strategy being fleshed out. Not many budgets linger long in the memory and it is unlikely that Healey’s will break with this tradition.

In essence, it has bought Healey and Burnham some time. For the moment they can argue that the budget was just part one of a three-stage process, to be followed by the government’s 10-year-plan and next year’s spending review. They need to use that time wisely or the glitzy PR will cease to impress.

There are, of course, reasons why the chancellor played it safe. Energy prices have rocketed since the US and Israel launched their war against Iran in late February. The consequent higher inflation has resulted in higher interest rates for mortgages, business loans and government borrowing.

Optimism about an early resolution to the war is fast fading. Indeed, the prospect of an intensification of the conflict after next week’s US midterm elections has led to a fresh surge in the cost of crude oil and gas in the past couple of weeks. The modest help provided in the budget to reduce energy bills will be dwarfed by the expected price increases in January. A tough winter lies ahead.

As the dust settles, a number of conclusions can be drawn. One is that Britain remains – as Burnham once put it – in hock to the bond markets. Healey may well have wanted to come up with a more generous energy support package, but was constrained by the fear that the financial markets would cut up rough. Ever since Liz Truss’s mini budget in 2022, governments have lived in fear of another sell off in government bonds. Healey is like a contestant in Strictly Come Dancing – he knows that the markets always have the casting vote.

To be fair to the chancellor, he borrowed £20bn more to invest in infrastructure spending, using the flexibility in meeting the government’s rules for the public finances provided by Reeves. That was welcome and – at first glance – didn’t appear to unsettle the markets.

Whether Healey’s array of minor fixes to help with cost of living pressures is enough to keep voters sweet is another matter. The economy has so far showed impressive resilience in the face of the energy shock caused by events in the Middle East, but that strength has been concentrated in the financial and business sectors of the economy, with growth in artificial intelligence particularly striking. Consumer-facing sectors – such as hospitality and housing – have been much weaker, with the most recent report on consumer confidence showing the sharpest monthly fall since the Brexit referendum in 2016.

That’s hardly surprising given the fact that taxes as a share of national income are on course next year to be at their highest ever level, and that spending power is being eroded by rising fuel and energy costs. In its latest report on the economy, the Office for Budget Responsibility (OBR) estimates that living standards will fall next year and by 2030-31 will be only 2% higher than they were before the Covid pandemic. A lost decade in other words.

It is against this unpropitious backdrop that many pundits – particularly in the City – have seen the lack of meat in the budget not as an indication that the government is dithering, but as a sign that Burnham is preparing the ground for an early general election. On this reading, all the big decisions – on social care, relations with the EU, and defence – have been parked until the prime minister has his own mandate.

The case for holding a snap poll is not just that voters seem to have taken to Burnham, although he is certainly enjoying a honeymoon period. It is also that Labour is currently benefiting from the lack of a single challenger on the right as the Conservatives and Reform slug it out, and from the problems facing both the Greens and the Liberal Democrats on the left. The polls show Labour in the lead.

Even so, an early election would be a colossal risk for a party with a commanding majority and two and a half years of the current parliament still to run. The OBR thinks the economy will grow more slowly in 2027 than in 2026, while living standards will actually fall before picking up in 2028 as the energy shock abates. Next week’s anticipated rise in interest rates from the Bank of England may not be the last. The prime minister is arguably at the peak of his popularity.

Burnham has repeatedly said that he has no plans to go to the country early, which if true will be a relief to the many Labour MPs who would almost certainly lose their seats, even now that the polls are looking more favourable. But if that is his intention, he will need to get a move on – because now is as good as it is going to get.