The Autumn Budget has focused on maintaining fiscal discipline and improving living standards, rather than setting out a strategy for growth.
This makes it a stabilising Budget, but not a particularly ambitious one.
The Chancellor arrived at this Budget having to satisfy three key groups: financial markets, households and businesses. Making all three happy was always going to be difficult.
Financial markets
Fiscal stability was key to reassuring the financial markets, and there were no big giveaways or tax cuts. While the headroom has not been restored to the same level, measures have been taken to slowly recover it to £15bn by 2029-30 and £22bn by 2030-31. Both of the Government’s fiscal rules, on stability and investment, have been met. The OBR’s report shows borrowing falling year-on-year. As a result, the markets have not been spooked.
Households
In many ways, this remained a Labour Budget. Commitments to strong public services, ending homelessness, and supporting those most in need, are true to type. Households will benefit from a large number of small measures although none of them will be life-changing. These include support with energy bills, a 3.9% increase in the minimum wage and support for first-time house buyers.
Businesses
The picture for businesses is more mixed. There is £20.4bn of investment for the National Wealth Fund and the British Business Bank, and high street businesses have received support, with the business rates relief threshold raised from £12,000 to £18,000, taking 70,000 businesses out of rates altogether.
Banks and gambling businesses were hit harder, but not as hard as expected. The banking sector will be slightly relieved, although not entirely happy, that the bank surcharge has only risen by 3 percentage points.
But while there was talk of innovation, there was no clear strategy for growth. This comes as the OBR predicts modest growth in the coming years, starting at 1% in 2027.
A successful Budget?
Given the objective – to buy some breathing space – has this Budget been a successful one? The financial markets have not been spooked, a number of measures were announced for households suffering with the cost-of-living, and business suffered less than in the two previous Budgets.
The truth is that this was a holding Budget, rather than a pre-election Budget, with no significant changes. If the aim was to buy the Government breathing space before it has had the chance to build a vision for long-term economic growth, then the Chancellor has achieved it.
Leave a Comment