Even a ‘boring’ Budget can be a risk, chancellor

Remarkably, John Healey is the eighth chancellor of the exchequer since George Osborne was sacked in the wake of the Brexit referendum a decade ago, this turnover in personnel being not the least of the many instabilities triggered by that regrettable event.

Indeed, some of those who came before Mr Healey were deprived even of delivering their first Budget. Unless something very untoward happens before Wednesday, that fate should not befall Mr Healey.

Ideally, this is the moment for Mr Healey to set out detailed plans for how the government will deal with the major challenges facing the nation. Sadly he won’t.

Welfare reform, social care, reforming taxation to promote investment and growth, giving a million young people presently languishing without work, education or training a fresh start, getting the cost of servicing the national debt down, and funding the defence of the realm – the very issue on which he so dramatically resigned from Sir Keir Starmer’s administration… Healey will duck the lot.

All the signs are that this Budget will be a very modest event indeed, and excessively so. It has already been spun as a “steady as she goes” affair, and limited to small tax rises and interventions. Thus, it would now be a shock if there was not another tax raid on the banks, enjoying bumper profits as interest rates have risen; some relief for older people at risk of being drawn into paying income tax on the state retirement pension; and targeted funding for defence manufacturing, housing (including for the homeless), and business rates relief for smaller businesses.

Once again, the Burnham government is sweating the small stuff. The latest briefing lists higher tax-free mileage rates, extending parental pay, ending the carer’s allowance cliff edge, rolling out hundreds more Post Office drop boxes, and removing import tariffs on baked beans, chocolate and jarred pickles.

Mr Healey may not want to have his fiscal event remembered as the “Gherkin Budget”, but, for want of more, it probably will be. All nice to have but not exactly doing much to reverse the “wrong turn” Mr Burnham says Britain took 40 years ago.

Beyond the pickles, searching for the beef, we must await a plethora of reports and consultations due to be published in the coming months, as the Burnham administration rather methodically decides what to do.

There will, for example, be further reviews of adult social care, of sickness and disability benefits, including the Motability scheme, the final chapter of the Milburn review on so-called Neets, a comprehensive public spending review next year and the 10-Year Health Plan, due by the end of the year.

More amorphous, but of potentially fundamental importance, is the outcome of talks with the EU on closer economic cooperation and the “honest discussions” among the public about recasting, or reversing, Brexit. For example, reinstating freedom of movement for EU and UK workers across the continent would have immense implications for economic growth and tax revenues, but the Treasury and the Office for Budget Responsibility can make no assumptions about anything that is not actually stated government policy – and rightly so.

So there are respectable reasons for the chancellor to make this maiden fiscal speech a dull affair – a boring Budget – but, paradoxically, that is also a risky strategy.

Politically, it would be far better if he could tell people now precisely how he plans to get the cost of living down, make social care and the social security bill sustainable, and when they might expect the burdens of business and personal taxation to ease. At the moment, people seem inclined to give the government the benefit of the doubt as they continue to assess options – but if it drags on for much longer, the government will begin to look rudderless.

Hemmed in by the “red lines” in the 2024 manifesto (notably, on Europe and tax), and his own promise not to hold a general election before 2029, Mr Burnham will look more like a caretaker than a purposeful national leader.

More hazardous will be the reaction of the markets. Even in a Budget that merely marks time, there has to be some solid realistic suggestion of a path whereby public spending and borrowing will come down to manageable proportions, and that inflation will be brought back to the 2 per cent target.

On the optimistic side, Mr Healey can point to some encouraging signs of resilience, and the hope that the wars in Ukraine and Iran will subside. On the pessimistic side is the short-term certainty that the wars will carry on, suspicions that spending, for example on defence, is being disguised as “investment”, and medium-term indications that Mr Burnham lacks the will to face down his MPs on welfare reform.

Of his three audiences this week, it is investors that Mr Healey has the most to fear from. He should be careful. They may not like gherkins.