‘It could have been from Gordon Brown’: Experts weigh in on how radical Labour’s budget really is

As the first Labour budget in 14 years, Wednesday’s autumn statement from Rachel Reeves was billed as a once in a generation event. A “huge day for Britain”. The most consequential in 20 years.

Reeves announced £40bn in tax rises, increased the minimum wage and tweaked taxes on cigarettes, pints and second homes.

Underneath the surface, however, do the chancellor’s economic plans fundamentally change things for the UK? Economics experts told Big Issue it had meaningful policies, but stopped short of a truly radical shake-up.

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‘This could have been delivered by Gordon Brown’

“Today’s budget came across as politically quite clever – fulfilling (much needed) spending promises by targeting tax increases mostly on businesses and richer people,” Calvin Jones, professor of economics at Cardiff University, told Big Issue. 

“For the working poor, increases in the minimum wage will be very welcome, as will limiting the attractiveness of Right to Buy, but bearing down on vaping, tobacco and petty shoplifting, while giving climate and air quality-destroying fossil-fuel car drivers yet another let off, shows where Reeves’ social instincts lie.”

But, said Jones, little attention was paid to very modern problems like the climate emergency or the “demographic time bomb” from an ageing population. “What is striking is that this a budget that could have been delivered pretty much word-for-word by Gordon Brown in 1997. The subsequent decades have seen big changes in the UK and the world however, and notable today was the complete lack of discussion about anything much that was deeply structural or really long term,” Jones said.

In all, it seemed like Reeves was betting the house on GDP going up, Jones added. “It’s pretty clear that Labour’s success will live or die according to its success in driving much increased economic growth – but this is forecast to remain under 2% by the OBR over the parliamentary term,” said Jones. 

“It’s not really clear so far where this step-change will come from.” 

A shift in fiscal rules hasn’t panicked markets

One major shift came in a new “fiscal rule” introduced by Reeves, changing the way the UK measures debt. A shift to public sector net financial liabilities (PSNFL) allows more borrowing for investment by counting financial assets like pensions and student loans, as well as liabilities. “This means we count the benefits of investment, not just the cost”, Reeves said.

The current fiscal rule measures public sector net debt (PSND), but it’s not as far as Reeves could have gone. Adopting the public sector net worth (PSNW) measure would include assets like schools and hospitals.

These fiscal rules set the pitch for the government, as it tries to meet the targets it has set on the economy. Under Jeremy Hunt, these gave rise to talk of a “black hole” in the public finances. Reeves has shown willingness to use the freedom governments have to shift the goalposts – and markets have not reacted with the panic which followed the extra borrowing in Liz Truss’s mini-budget.

‘It fell short of fundamentally tackling the UK’s poverty problems’

Spending on infrastructure like schools and hospitals will help relieve some of the pressing problems in the UK, said Nick O’Donovan, a senior lecturer in economics at Keele University. But the tax rises needed are likely to hurt wages in the future.

“Rachel Reeves promised a ‘once in a generation’ budget, and in many respects that is exactly what she delivered. A £70bn increase in public spending, paid for by £40bn in tax rises, will go a long way towards fixing many of the problems in the UK’s public services and in the UK economy itself,” Donovan told Big Issue.

“Additional welfare spending was announced, but it fell short of fundamentally tackling the UK’s poverty problems. Nevertheless, the signs are there that the chancellor grasps the scale of the challenges facing the UK, and intends to address them.”

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