Chancellor John Healey will present a Budget that has to reconcile the new government's ambitions with an economy short of cash, according to BBC political editor Chris Mason. In his assessment for the BBC, Mason writes that the fiscal statement must make progress toward the pledges made by Prime Minister Andy Burnham while working within severe financial limits.
Healey himself acknowledged the squeeze last month, saying the resources available to New Labour in the 1990s no longer exist and that Britain now faces a harder situation, the BBC reports. Burnham, in comments made days before taking office, described the coming period as the most significant change in British politics in four decades.
Why it matters
The Budget is the first real test of whether the government can turn political rhetoric into visible results for households. According to the BBC, Helen Miller, director of the Institute for Fiscal Studies, described a relatively new administration with apparently large ambitions but a long list of constraints. Some of those limits are self-imposed, Miller said, while others are being made worse by global events, most notably war in the Middle East.
Mason notes that many figures across Westminster of all parties argue the size of the pot is not the only thing that counts — how well public money is used, and where, matters just as much. Still, he writes that much of the Labour Party instinctively believes the state can and should be a driving force for improving people's lives, a view that governments should step in proudly rather than stand back.
The difficulty, per the BBC, is delivering that kind of active state when the tax burden is at a generational high, national debt is very large, energy bills are climbing and inflation has come in above forecasts.
Cost-of-living help, a bank levy and defence spending
Ministers reject the idea that these pressures leave them powerless, Mason reports. Support with the cost of living, particularly energy bills, is widely expected to be aimed at the most vulnerable households. Banks are preparing for a levy or surcharge that could help pay for that assistance.
An announcement on additional defence spending is also anticipated, according to the BBC, though the detail of how the commitment to spend 3% of national income on security by 2030 will be met has been pushed to next year's Spending Review.
Devolution is set to be another central plank, reflecting one of the prime minister's signature ideas about moving power out of Westminster. Healey told BBC Newscast there would be a "really radical devolution of powers and resources to local leaders that are often better placed to get beyond the departmental systems," the BBC reports.
Mason adds that some in Westminster worry that extra funding for mayors and other local government figures has not yet been matched by sufficient checks and balances to guarantee the money is spent well.
Mixed economic signals
The chancellor is expected to argue that the economy is strengthening. Mason points to indicators running ahead of forecasts: growth and productivity are both performing better than predicted, and unemployment has fallen.
The Resolution Foundation think tank offers a more cautious reading, according to the BBC. It says conflict in the Middle East has pushed energy prices and interest rates up again, meaning that despite signs of greater resilience in the UK economy, households and the public finances face another shock.
Mason's overall expectation is a smaller Budget than several in recent years in terms of the scale of tax and spending changes. Healey has spoken of wanting to provide "breathing space" and "hope" — which Mason reads as an implicit recognition of how much the government can achieve within its limits.
Those limits include a pledge not to increase income tax, national insurance or VAT, which the IFS characterised as self-imposed, alongside international pressures the government cannot control.
The central question, Mason writes, is whether the Budget is large enough for the moment. Opposition parties are likely to dismiss it as tinkering, while the government will present it as one of several steps in the coming weeks and months aimed at delivering the scale of change Burnham has promised.
The Budget follows recent BBC coverage of energy trade-offs after the Jackdaw approval, and separate reporting on measures that could feature, including tax on banks, help with energy bills and an increase in the minimum wage. Other outlets have framed the moment differently: the Telegraph has published letters calling for a Budget that rewards hard work and ambition, the Times has argued that a "tomorrow" budget only postpones the pain, and Bloomberg has suggested a "do no harm" approach has a limited shelf life.
For CYBEV readers, the takeaway from Mason's analysis is that the fiscal room for manoeuvre is narrow and the political expectations are high. Whether Healey can satisfy both will be judged once the measures are set out and their effects feed through to household budgets.
What to watch: the specific cost-of-living measures and bank levy in the Budget, the pace of devolution deals, and the Spending Review next year, where the path to 3% of national income on defence is due to be set out.
