5 takeaways from Andy Burnham’s first budget

1. News

LONDON — Andy Burnham became Britain’s prime minister 100 days ago on a pledge to end 40 years of neoliberalism. His first budget announced he wouldn’t do that on the front page.

Wednesday’s 150-page red book was titled “breathing space for today, fresh hope for the future”, a confession, with true British modesty, that it was a stepping stone to bigger pledges downstream.

Burnham’s top finance minister, Chancellor John Healey, unveiled 98 changes, including help for most households’ energy bills, which are due to spike this winter because of Donald Trump’s war with Iran, and a £10 billion defense package to support Ukraine.

Many of the tax tweaks were limited and technical, including an 8% cut to tariffs on soy milk. Healey’s ambition was reined in by surging global oil prices and a political choice by his boss not to blow the doors off yet.

Burnham has reviews on the creaking welfare system, devolving power to the regions and a “10-year plan” all coming before Christmas. Only then can he grind out the numbers for next year’s spending review.

The Labour MP Darren Jones, who served in the Treasury until Burnham arrived in July, called it a “steady-as-she-goes budget” that was to be expected. Many Labour MPs were happy, cheering measures for their area and pointing toward a bigger bang later on. Industry lobby groups could grasp onto something in their area of expertise.

But with U.K. growth struggling, others were less generous. Joe Shalam of the Conservative-aligned Centre for Social Justice think tank called it the “fudge-it budget.” Tory leader Kemi Badenoch asked: “Is that it?”

Perhaps the trickiest response for Burnham was from Mainstream, the left-wing campaign group that helped propel him to the Labour leadership this year. “Ending 40 years of neoliberalism can only be delivered by radical action,” read a statement by the group’s interim council.

POLITICO looks at five other takeaways from Wednesday’s budget.

1) We’re in the holding pen

The chancellor’s big bazooka was to slap a much-anticipated tax rise on banks — but he surprised many by saying it will last only 15 months. It will raise less than £1 billion in its peak year.

It wasn’t the only temporary measure Healey unveiled on Wednesday. He extended existing cuts to fuel duty, a tax cut on household energy bills and a £2 cap on bus fares, but only until 2027. They will all need to be reviewed again before his next annual budget.

Likewise, some of Healey’s spending plans thin out after a few years, which suggests they may need topping up later. This applies even to the areas closest to Burnham’s heart. Budget documents suggest support to end rough sleeping will total £1.1 billion in the two years from April 2027 but only £270 million in the three years after that.

There were plenty of changes, of course, such as to writing-down allowances, property income taxes and tax on savings. Whitehall will have to find more administration cuts while tax inspectors hunt down another £3.2 billion a year. But the Institute for Fiscal Studies, a non-partisan economic think tank, called it all a “hodgepodge” of “fiddly measures” that would do little to affect growth.

Many of the more fundamental decisions were kicked down the road. Healey has committed to spending 3.5% of GDP on defense by 2035, but will only spell out how to fund it in a spending review at some point in 2027. Major reforms to the welfare system — spending on which is still rocketing — will only be decided after two reports by the Labour grandees Stephen Timms and Alan Milburn are published in November.

Healey published a “fiscal devolution roadmap” that spelled out a path to handing regional mayors full control of the business rates raised in their areas by the end of the decade, but this has an element of wait-and-see too.

Healey had a narrative for his cautious approach. “I decided on an early budget to give the country a bit of breathing space and to provide stability and direction in the face of speculation,” he told MPs Wednesday. “We’ll continue to map out that direction for Britain through the prime minister’s 10-year plan and the spending review.”

This is not the Burnham who complained Britain was “in hock to the bond markets” last year.

2) Everything is terrible, so blame the White House.

Burnham and Healey can blame Trump — up to a point.

The chancellor said the headwinds that once faced Britain are now “global economic storms,” fueled above all by the U.S. conflict with Iran. “We did not want this war,” Healey told MPs.

Journalists spent Wednesday trawling through the usual gloomy parade of numbers about the U.K. economy produced by the independent Office for Budget Responsibility. Britain’s projected growth in 2027 was cut from 1.6% to 1% (though Treasury officials insisted GDP per person will rise overall by the end of the decade).

Healey chose to leave himself with a smaller fiscal buffer than his predecessor Rachel Reeves, telling MPs he had used it to “absorb the impact of the Iran war.” He also raised net taxes by £7 billion a year, though this was far less than the £26 billion in Reeves’ last budget.

But the situation is so volatile that these numbers, based on market energy prices in mid-August, are probably already out of date. The OBR’s “severe shock scenario” had oil prices peaking at around $115 a barrel in the first half of 2027. They already hit that level this week.

Healey insisted that Britain is doing well in the circumstances; his ministers all point to an International Monetary Fund prediction that the U.K.’s deficit will be the lowest in the G7 by 2029.

Opposition parties, however, paint a picture of a nation where everything is just getting gloomier. The tax take was already on course to rise to a record high; Healey broke that record again on Wednesday. (It is now due to reach 38.6% of GDP.) Britain’s spending on debt interest has almost tripled since 2020.

3) Defense spending is still a big, big headache

Healey resigned as defense secretary under former Prime Minister Keir Starmer in June to protest the lack of military spending — but now faces mounting unanswered questions about his own plans.

Healey did two big new things on defense spending on Wednesday. First, he confirmed an open secret in Westminster: he plans to reach 3% of GDP by 2030 — on a path to NATO’s 3.5% by 2035 — but repeated that the details of how he’ll pay for it will only be spelled out in next year’s spending review.

Secondly and more significantly, he outlined his plan to plug a ​​£1.8 billion-a-year gap in Starmer’s defense investment plan — but provided only scant details. 

The Treasury said it will be paid for by shaving 1% off each Whitehall department’s capital budget in the coming years. However, those departments have not yet worked out what they will cut; that is a problem for another day. These questions will dog Healey for the next year.

At least one person was delighted: Volodymyr Zelenskyy. The Ukrainian president said the chancellor “made my day” with a £10 billion package of economic and military support to Kyiv. Part of the package needed special sign-off by ministers because civil servants warned they could not guarantee it would provide value for money.

4) There was something to make Labour MPs happy

Much of what Healey did unveil appeared to be aimed at preserving the “Burnham bounce” in the polls and with his own MPs. 

The chancellor called it a “budget for the working people of Britain” and Treasury analysis says it was redistributive, handing the biggest boost to the poorest households (albeit only raising their incomes by 0.6%).

Central to this was Healey’s closest thing to a “rabbit out of the hat” — a £100-per-household cash payment to people living in homes below a certain value this winter. One Labour MP enthused that the criteria for the payment (which Treasury officials say will capture 88% of the poorest households) was “absolutely brilliant” because it will capture working households and those on benefits at the same time.

There was another £1.5 billion for social and affordable housing, a “covenant” to govern new AI data centers and changes to mileage rates for self-employed workers. Burnham has prided himself on being a grassroots politician; it was a grassroots package.

How much voters will notice is another question. The IFS warned the package of “breathing space” measures was still “relatively small.” It could be swallowed by a rise in annual energy bills in January — predictions of which have recently ranged from £276 to £469.

The OBR warned there has been “virtually no growth” in real household disposable income per person over the last decade or so, and predicted “no real earnings growth in 2027” despite Burnham and Healey’s efforts to help.

5) MPs won’t stop chattering about an election

Burnham only has to call an election by mid-2029 and keeps trying to snuff out talk of going earlier — but every prime minister does this until they don’t.

His MPs were studying the budget Wednesday to work out if it makes an early general election more or less likely. It’s fair to say they couldn’t agree.

On the one hand, this cautious budget of temporary measures might suggest Burnham — who needs his own mandate for more radical changes to the electoral system or Britain’s relationship with the EU — is holding out for the country’s backing.

Others would say a cautious stepping-stone budget is hardly the eye-catching approach you would take if you were about to sell yourself to voters. Growth is set to be slow next year; Burnham needs time to turn the economy round and show he can change things.

Burnham told journalists on Wednesday: “I don’t know how many times I’ve done this now, but yes, I can rule out calling a general election in the next 12 months.” The speculation will continue anyway.

Esther Webber, Emilio Casalicchio and Sam Blewett contributed reporting.