Burnham blusters but delivers lacklustre Budget

Labour’s 2025 Budget 2026 Budget

The Budget cycle since Labour came to power is beginning to feel like a grotesque Groundhog Day. Another Budget arrives promising change, another Budget leaves the foundations of the failed economic model intact. The gap between Burnham’s lofty promises and his Chancellor’s announcements could hardly be wider. A Prime Minister who pledged a reset, and an “end to neoliberalism”, has instead presided over another round of wholly inadequate tinkering.

We are still working through the announcements in today’s Budget, which includes a record number of individual policy announcements (98) with a record low average monetary implications. We’ll have a deeper analysis of the details next week. But for now, we wanted to step back and look at the bigger picture.

Tinker, failure to be bolder, sigh

If “ending neoliberalism” means anything, it must mean rejecting the failed idea that making the super-rich even wealthier somehow benefits everyone else. For decades, governments of all stripes have accepted a model that protects obscene wealth, prizes privatisation and treats corporate profits as untouchable, while expecting everyone else to live with the consequences. This Budget leaves that model largely untouched.

While many people will welcome some announcements that provide a little bit of cost of living relief, the scale does not match what was needed, especially with the enormous projected energy cap rise coming in January. There are some good things, like the extension of the VAT relief on electricity and removal of standing charges. But a lot of households will need a lot more support to avoid serious pain over the winter and into 2027. So much more was needed to provide help immediately, alongside long-term investment to transform our energy system and to get profiteering out of utilities that we rely on.

We should judge this Budget against the promises that were made, not against the low bar we’ve normalised. The council tax rebate and energy bill support largely mirror interventions made under Sunak’s Conservative government. They might offer “breathing space”, but they do not fundamentally change the economics of a country where millions have been cut adrift in a rising sea of costs for housing, childcare, transport and energy costs continue to outpace living standards. And crucially, much of this support has been paid for through tinkering and ledger fiddling measures, while the largest concentrations of wealth remain largely untouched.

Caveats for fat cats

There were some positive tax measures. The government increased taxes on income from property and savings, moving them more in line with the rates on income from work. But still maintaining landlords exemption from National Insurance Contributions that are expected from their working tenants. Business Asset Disposal Relief, an unjustified backdoor that allows some to get out of Capital Gains, often described as one of the UK’s worst tax breaks, has been scaled back. But for some reason not scrapped entirely. Additional HMRC compliance staff, stronger enforcement powers and investment in debt recovery should help tackle some forms of tax non-compliance. But this has focused on small fry dodgers, and made no reference to the tens of billions being lost to corporate offenders annually. There was also a welcome crackdown on VAT avoidance through online marketplaces, but no rises on those marketplaces mega-money profits, or bevvy of sweetheart tax deals. 

Instead, ministers announced a new Capital Gains Tax founders relief costing £260 million a year by the end of the parliament. This is an unjustified giveaway built on the mistaken assumption that lightly taxing wealth automatically drives growth. The evidence suggests the real barriers facing business expansion are access to finance and investment, not the tax entrepreneurs pay when they eventually sell a company.

There was no progress on a Wealth Tax. No serious reform of Capital Gains Tax. No equalisation of taxes on wealth and work. No meaningful reform of council tax. No windfall tax on excess bank profits. No substantial action on aggressive corporate tax avoidance. No commitment to bring failing privatised utilities back into public ownership.

Those choices matter because they leave enormous sums on the table. Money that could have funded transformational investment in housing, childcare, public transport, social care. And the services people rely on every day instead remain concentrated in the hands of the wealthiest individuals and most profitable corporations who keep fleecing us at every opportunity.

Too big to fail, too big to tax?

Healey’s expected “big announcement” on bank taxes was to partially and temporarily reverse Jeremy Hunt’s slashing of the bank surcharge from 8% to 3%, increasing it to 6% for just 15 months. This will raise around £1.4 billion. It is a step in the right direction, but a very small one. It falls far short of our calls for a genuine windfall tax on excess profits, a 38% levy on profits swollen by higher interest rates, matching the rate imposed on profiteering oil and gas giants in 2022, that would have raised £19 billion. But this small win was only made possible because so many people piled the pressure on the government about this issue. 

The UK public’s bailout of the banks in 2008 is still responsible for around £30 billion of national debt. When times were bad, made so by the banks’ own reckless behaviour, we stepped in. Now, as they make bumper profits from higher interest rates while households struggle with soaring mortgages, rising rents and mounting debt, we’re told once again that contribution only flows one way. 

The missing £17 billion matters. It would have been enough to build 90,000 social homes to make a serious dent in the housing crisis, with another £6 Billion to spare. But so does how it disappeared. Once again, calls to properly tax the banking sector appear to have been watered down through the usual closed-door meetings and privileged access enjoyed by powerful financial interests before every Budget.

It’s hard to take promises of “ending neoliberalism” seriously when the flagship intervention in the banking sector amounts to a temporary partial reversal of a Tory tax cut. We now need to continue the campaign to make sure banks cough up their fair share, because if you want to know who markets think won this Budget, bank share prices have surged this afternoon.

Rumours of Neoliberalisms demise have been greatly exaggerated

Healey continues to insist public services must operate within tight fiscal constraints while refusing to confront the enormous concentrations of wealth that have accumulated at the top of society. The result is a politics of permanent scarcity for everyone except those who have benefited most from the current system.

In many ways, this was a Budget of deferrals. Many of the decisions that would signal a genuine break with the status quo have been pushed into future consultations, future reviews and future plans. That places enormous pressure on the Government’s Ten Year Plan, next year’s Spending Review, the forthcoming Wealthy Compliance Strategy and the long-delayed action promised on illicit finance.

Taken together, the Budget tells a clear story. Healey and Burnham are willing to trim, trifle and tinker but they remain unwilling to confront the enormous concentrations of wealth and corporate power at the heart of Britain’s economic problems. Burnham came into office promising a different economic settlement. Whatever way you cut it, he’s delivered more of the same.