Andy Burnham’s ‘Breathing Space’ Budget Leaves Britain Holding Its Breath

Andy Burnham has repeatedly insisted that he is on a mission to “end 40 years of neoliberalism”.

However, all the evidence from his Chancellor’s first budget suggests that this mission will be a very long time coming, if it comes at all.

Absent from John Healey’s address on Wednesday was any immediate plan to radically reshape the economy, let alone rip up the central economic philosophy which has dominated the past half a century.

In its place was a series of relatively modest measures to provide “breathing space” from the crushing global economic forces that have followed in the wake of Trump’s Iran war.

Under Healey’s plans, gas standing charges will be scrapped, £100 energy payments will be distributed to 80% of households and self-employed dads will be given the right to parental leave. Homeless people will also be helped, with hundreds of millions of pounds in additional funding to get people off the street.

In order to pay for this, taxes will be raised on banks, with gambling and vape shops removed from the tax rate relief handed to other high street retailers.

However, absent from Healey’s speech was the previously trailed plans to raise capital gains tax in line with income, with the tax rise on banks also only made temporary, with Healey telling MPs that “I want to say directly to our banks, I celebrate, and I am grateful for the role that you play.”

Of course, at a time of soaring prices triggered by the closure of the Strait of Hormuz, every little helps.

Yet the help offered by Healey today was undoubtedly little.

According to the Government’s own Office for Budget Responsibility, living standards will continue to fall over the coming years, compared to previous forecasts, with the nation’s material well-being only forecast to rise to just two percentage points above pre-pandemic levels by the start of the next decade.

Economic growth, which Burnham has promised to restore “in every postcode” in the UK, is also forecast to remain at anaemic levels for many years to come.

There may be good reasons for the modest nature of Healey’s plans. Public sector debt and the tax burden remain at record highs and the ongoing global uncertainty caused by the Iran and Ukraine wars means that the Chancellor has much less room for manoeuvre than his predecessors.

Yet anyone looking for a bold plan to rip up four decades of neoliberalism, or even for a signal of when that might come, will have been disappointed.

As the prominent Burnham supporter Neal Lawson, of the think tank Compass, put it in the wake of Healey’s statement: “The immediate essentials relief for people up and down the country has to be welcomed. But the lack of any tangible long-term vision here is worrying…”

“The vision must now come in the 10-Year Plan because it certainly wasn’t here. No one could discern from the Chancellor’s speech what kind of economy he was building for what kind of vision for society.”

Other measures announced today could prove to backfire. Few will shed a tear for Britain’s landlords, who face a tax rise under today’s budget. Yet according to the OBR, the planned rise is likely to simply be passed onto renters, actively taking away the “breathing space” Healey promised to provide.

There were also signs of further backtracking on the Government’s green commitments, with Healey saying he wants to speed up the construction of polluting gas-powered data centres to help Big Tech companies, whilst insisting the Government will “only buy and build new [clean energy] projects when they lower bills”.

Responding to Healey’s statement, the Green Party leader Zack Polanski said the Chancellor had “refused to fix the foundations of the economy – and instead offered cosmetic tweaks that will do nothing to buffer people against the fossil fuel rollercoaster.”

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Somewhere Over the Rainbow Budget

Despite the relatively modest nature of this Budget, there were signs of potentially bolder action to come. 

Prior to Healey’s statement, Burnham faced the Leader of the Opposition, Kemi Badenoch, who devoted all of her questions to interrogating the Prime Minister’s plans for Brexit.

Unlike his predecessor, who essentially parked the issue of Britain’s relationship with Europe, Burnham again opened the door to a radical shift back towards the EU.

Refusing to withdraw his previous suggestion that Britain could one day rejoin, or his suggestion that he could accept a return to freedom of movement in order to do so, the Prime Minister set Britain on course for a change which would do far more to restore growth in the British economy than any other policy announced this afternoon by his Chancellor.

Burnham’s mark could also be felt in Healey’s announcement that local and regional Mayors will in future be handed much greater powers to raise taxes and borrow money, opening the door to exactly the sort of big infrastructure projects that have stalled over the past decade.

Under these plans 100% of business rates will be retained locally by the end of the decade, with mayors also handed a share of income tax receipts from 2028 onwards.

These are potentially big changes, but they are changes that will take years to be felt.

They are also changes that require exactly the sort of flexibility on tax and spend that Burnham’s pledge to stick to Labour’s 2024 manifesto currently makes incredibly difficult.

It is difficult to see how this conflict between the huge scale of Burnham’s rhetoric and the relatively small scale of Healey’s “breathing space” policies is sustainable.

If the Prime Minister genuinely wants to “rip up neoliberalism”, restore growth in every postcode, and take Britain back into a close relationship with the EU, then the only path to doing so involves a general election.

At some point, this conflict will have to be resolved and it will have to be resolved by the country going back to the polls.

The logic of Healey’s ‘breathing space’ Budget suggests that this time could come sooner than many in Westminster currently expect.