John Healey called it a Budget of “breathing space”. Twenty-four hours later, the people paid to check his numbers are describing something closer to a slow squeeze.
The chairman of the Office for Budget Responsibility, Prof Jonathan Haskel, told BBC Radio 4's Today programme that real household disposable income had “gone right down”, calling it “a very difficult outcome” for people and the economic outlook “a pretty grim picture”. The Resolution Foundation, the think tank that focuses on living standards, went further, accusing the chancellor of a “complete failure” to target help at those who need it most.
Strip away the Commons theatre and the red box on the Downing Street step, and the verdict from independent economists is stark: households are being offered small, short-term relief while the bigger bills — on energy, defence and welfare — are left to land later.
A £100 payment against a £276 rise
The centrepiece was a one-off £100 Household Energy Payment for up to 20 million homes in council tax bands A to D in England, alongside the removal of standing charges from gas bills, an extension to July of the cut in VAT on electricity and a freeze in fuel duty to the same month. The Scottish government says it is aiming to replicate the £100 payment with the equivalent funding it will receive.
But the payment arrives as energy bills are forecast to rise by £276 in January. And because it is linked to council tax bands that are still based on property values from 1991, it is a blunt instrument: a pensioner in a large, cold house in band E gets nothing, while a well-off household in a newer band D flat qualifies.
The Resolution Foundation's figures expose how blunt. It calculates that the poorest half of households will gain £158 on average from cost-of-living support this year and next — just £14 more than the £144 received by the richest half. Even after all the help, it expects a typical annual energy bill to reach about £1,750 in 2026-27, higher than the £1,685 households paid at the height of the 2022-23 price shock that followed Russia's full-scale invasion of Ukraine.
Ruth Curtice, the foundation's chief executive, said: “Faced with a tough backdrop amid global economic turmoil, the chancellor delivered a scattergun budget that did little to address the sharp challenges facing Britain.”
Poorer by the time of the election
The most damaging number in the post-Budget analysis is not a tax rate but a forecast for family incomes. According to the Resolution Foundation, median real disposable incomes for working-age households will grow by a “paltry” £600 over the whole parliament — and those gains are already behind us. Between now and 2028-29, typical incomes are forecast to fall by £1,050, or 3%.
That is the backdrop against which the OBR cut its growth forecast for 2027 from 1.6% to 1.0%, even as it nudged this year's figure up from 1.1% to 1.2%. The government's buffer against its own borrowing rule has shrunk: Healey said tax revenues were expected to exceed day-to-day spending by £15bn in 2029-30, a margin that a single bad shock to energy prices or interest rates could swallow. The cost of servicing the national debt is £14bn higher this year than previously forecast.
Austerity by another name?
Asked directly whether the spending plans amounted to austerity, Prof Haskel declined to use the word, saying “I'll leave others to use those particular words” and that the OBR “just does the mathematics”. The Resolution Foundation was less coy. If the 3% defence target is met and real-terms health spending keeps growing at 2.6% a year, it says, the pencilled-in totals imply funding for 13 “unprotected” departments — covering areas such as courts, prisons, local government and further education — falling to 4.7% of GDP by 2031-32, close to the post-austerity low.
In other words, the squeeze has not been cancelled. It has been scheduled for after the next election.
The decisions that weren't made
Two of the biggest questions in British public finance were left unanswered. The chancellor did not set out how defence spending of 3% of national income will be paid for, and made no changes to welfare, with both expected to be dealt with at the spending review.
Welfare spending is forecast by the OBR to rise from £353bn this year to £431bn in 2031-32, and sickness and disability benefits are projected to cost £100bn a year before the end of the decade. On Thursday morning Healey told the Today programme: “There will be a reduction in the benefits bill. We'll do that in a Labour way.” He promised no “crude cuts”, a “tough” approach to young people who turn down offers of work or training, and changes once the Milburn review of young people and work and the Timms review of disability benefits have reported. He offered no figure and no timetable.
Meanwhile the money for this year's help has been raised from familiar targets. The bank surcharge doubles from 3% to 6% for 15 months from January, and an extra 2% tax will apply to income from savings and property rental from April — measures the Liberal Democrat leader Sir Ed Davey dismissed as “stealth tax rises”.
A chorus of criticism
Opposition reaction was uniformly hostile, if for different reasons. Conservative leader Kemi Badenoch called the Budget “not good enough, not strong enough, not bold enough”, mocking a government that promised to end 40 years of neoliberalism and delivered “4p off gherkins”. Shadow chancellor Andrew Griffith called it “disjointed” and described welfare as “the biggest out of control part” of the public finances.
Reform UK leader Nigel Farage said it was “deeply cynical” and full of “little giveaways” that did not “overall do very much”, with nothing “of any value on defence whatsoever”. The Greens said Labour was tinkering “round the edges” rather than properly taxing extreme wealth and profits.
In Scotland, the morning papers summed up the mood with headlines about a “hammer blow” and a “£100 trick or treat?”.
The verdict
Healey's own argument is that a government cannot control global storms, and that the single best thing for Britain's economy would be peace in the Middle East and Ukraine and the reopening of the Strait of Hormuz. That is true, and it is also an admission of how little room the Treasury believes it has.
The Prime Minister, Andy Burnham, has said he will not call an election within the next 12 months. But on the official forecasts, voters will have spent the second half of this parliament getting poorer, paying more for energy than in the last crisis and waiting for spending cuts that have been pencilled in but not named. A £100 payment before Christmas does not change that arithmetic.
