Burnham's first budget: temporary measures and big decisions postponed

UK Chancellor John Healey presented Prime Minister Andy Burnham's government's first budget to Parliament in London on Wednesday. Burnham has been in office for roughly 100 days after pledging to end 40 years of neoliberalism. The budget, however, is cautious and is described as a stepping stone to larger pledges later.

The document contains 98 changes. They include help with household energy bills, which are set to rise this winter because of the US war with Iran and its effect on oil prices, and a £10 billion economic and military support package for Ukraine. Ukrainian President Volodymyr Zelenskyy said the chancellor had "made my day". Households in lower-value homes will receive a one-off £100 payment, and a further £1.5 billion goes to social and affordable housing.

Temporary measures

The tax increase on banks will last only 15 months and will raise less than £1 billion in its peak year. Cuts to fuel duty, relief on household energy bills and a £2 cap on bus fares were extended only until 2027. The Institute for Fiscal Studies (IFS), an independent economic think tank, called the package a "hodgepodge" of fiddly measures that would do little for growth.

The Office for Budget Responsibility (OBR), the UK's independent fiscal watchdog, cut its 2027 growth forecast from 1.6% to 1%. The tax take is set to reach 38.6% of GDP, while net taxes rise by £7 billion a year.

Decisions deferred

Healey has committed to defence spending of 3% of GDP by 2030 and NATO's 3.5% target by 2035, but will set out how to fund it only in a 2027 spending review. Decisions on welfare reform will wait for two reports due in November. A £1.8 billion annual gap in the defence investment plan is to be covered by cutting each department's capital budget by 1%.

Burnham said he can rule out calling a general election in the next 12 months, though speculation is likely to continue.