The Government is gambling on growth, but this Budget won’t bring it. Many see it as a missed opportunity.

One thing everyone agrees on: Rachel Reeves’ first Budget contains a huge amount to unpick. Much of this is positive: a 6.7% rise in the minimum wage; funding for compensation schemes for victims of the infected blood and post office scandals; more money for education and the NHS and increases in capital gains and inheritance tax.

Big changes – but the central question is: does this Budget do what is necessary? The emerging consensus is doubtful.

Trade union reaction

Trade union leaders who broadly welcomed the measures still had concerns about specifics. TUC General Secretary Paul Nowak hailed the minimum wage hike but said: “The TUC wants to see a £15 minimum wage as soon as possible.”

The UCU, which represents teaching staff in universities and colleges, criticised the lack of funding for universities. General Secretary Jo Grady said the budget was “thin gruel” for the higher education sector.

The civil servants’ union PCS, expressed concern about the impact that the drive for 2% efficiency savings in government departments will have on public services. General Secretary Fran Heathcote said: “The Chancellor seems to have given with one hand while taking away with the other.”

And Matt Wrack, General Secretary of the Fire Brigades Union, called on the government to “go further and faster in rebuilding our broken public services.”

A Budget for Women?

The Women’s Budget Group, in a detailed analysis, called for “greater ambition both on changes to taxes and on the levels and areas of investment” set out in the Budget.

It pointed out that “for the women hardest hit by austerity and subsequent economic shocks since 2010, who are unable to work and reliant on social security, there will be another real terms cut which they simply can’t afford. Our analysis shows that the 1.7% uplift in benefits is the equivalent of just  £2.50 per week per person for a lone mother household. The Chancellor confirmed that inflation is expected to increase to 2.6% in 2025.”

It added: “It is disappointing that there were not more substantial changes to social security in the Labour Government’s first budget to undo some of the most punitive measures introduced since 2010 including the two-child limit, the benefit cap and the sanctions regime.”

It also slammed the reintroduction of the freeze on local housing allowance as “deeply disappointing for the hundreds of thousands of families struggling in temporary housing or facing eviction.”

Bad for the Disabled

The WBG was disappointed too with  the Government’s continuing with the Tories’ reforms to the Work Capability Assessment, saying, “These plans are likely to reduce the levels of support available to Disabled people. Our analysis shows that Disabled women are among those who have seen their living standards decline the most due to changes to tax and benefits and cuts to public services, losing 11% or the equivalent of over £4,000 a year.”

Ahead of the Budget, Disability Rights UK and other organisations had written an open letter  to the Chancellor and the Secretary of State for Work and Pensions, arguing that the proposed tightening of the Work Capability Assessment would be “devastating for the Disabled people affected.”

“According to the Office for Budget Responsibility, the proposed changed to the WCA will have affected more than 450,000 new Disabled claimants by 2028-29,” said the letter. “Many of these will lose hundreds of pounds a month with only around 15,400 able to escape into paid work. It is clear that these measures will do nothing to address current labour shortages. They will however increase levels of entrenched deprivation.”

The Equality Trust also slated Reeves’ commitment to the Tory plan to cut £1.3bn from benefits for people with disabilities – “something that will leave nearly half a million people losing up to £5,000 a year. On top of that, she’s chosen to also continue with plans to cut £3bn of benefits from people on long-term sickness benefits.”

Phil Burton-Cartledge said: “This was also a punitive budget for many on the sharpest end of the income scale. The bus fare increase stays. Even worse, Reeves confirmed she is keeping the last vindictive Tory attack on disabled people with her carrying through their plan (now her plan) to change the Work Capability Assessment.”

Zarah Sultana MP described the billions in cuts to disability benefits as “a return to austerity, on top of the means-testing of winter fuel payments and keeping the cruel two-child benefit cap.”

NHS and schools – not enough

The Women’s Budget Group said the Budget was right to prioritise the NHS. But it added: “With local councils on the verge of bankruptcy up and down the country, we are concerned that the same priority hasn’t been given to social care and the other vital local services provided by councils. The additional £600 million of funding to local authorities to support social care will likely not be enough to compensate for years of underfunding… Without significant investment in social care, pressures on the NHS will continue to build.”

In fact, the extra funding for the NHS may do little more than keep it on life support. The Equality Trust stated: “It is not enough to make much progress on the deep crisis facing the NHS. The maintenance backlog alone, according to the King’s Fund, is £13.8bn, dwarfing today’s increase in the capital investment budget.”

Likewise the extra funding for schools: the extra £6.7bn announced includes just £1.4bn for repairs, which is less than the £4.4bn a year needed, according to estimates by teaching unions.

Jon Andrews, the head of analysis at the Education Policy Institute, pointed out that “the special educational needs system remains in a perilous state, which risks services for some of our most vulnerable children being cut.”

On the Chancellor’s increased investment in the school estate, Daniel Kebede, the General Secretary of the National Education Union, said it was “a small dent in the £40bn cumulative cut to school capital funding since 2010.”

Not green

If the general feeling was that the Chancellor was moving in the right direction, albeit too cautiously, in many areas, this was definitely not the case on the environment. The increase in the bus fare cap, discussed previously on Labour Hub, and the freeze in fuel duty came in for particular criticism.

Hirra Khan Adeogun, Co-Director of climate charity Possible, called it “extraordinary” to see Labour preserve a Conservative policy on freezing fuel duty, saying: “Fuel duty will now be frozen for fifteen years, while the cost of public transport has gone up and up each and every year.”

The increase in train fares in England by 4.6% next year, with the price of most railcards rising by £5, has also drawn fire. Labour’s former Director of Policy Andrew Fisher called this “another dumb move. Above inflation fare rises – 4.6% – when inflation is due to be 2.6% next year – is not going to help with the cost-of-living crisis or tackling climate change.”

Soak the rich?

While the Tory press may howl about the unjust punishment of the rich, the reality is that the wealthiest in society got off lightly in this Budget.

Former Labour candidate Faiza Shaheen blogged: “Changes to capital gains tax amounted to minor tweaks to the rates, and… will continue to be easily avoidable by those with the means to do so. Inheritance tax changes also came with sizeable reliefs.”

The Equality Trust concurred: Labour’s modest rise still leaves capital gains tax the lowest in the G7 and lower than it was in 2016. The Women’s Budget Group said the rise could have gone much further, “with the potential to have raised up to £15.2bn a year instead of the estimated £2.49bn by 2029/30. The Government could go much further – a 2% annual wealth tax on people with £10 million in assets could raise £22 billion a year.”

On inheritance tax, Richard Murphy of the Tax Justice Network was scathing: “The changes to inheritance tax were amazingly generous to the most wealthy. Whilst the freezing of allowances continues to bring more estates within the scope of this tax, demands that rules be changed so that the wealthy might be required to contribute fairly with regard to the inheritance tax were largely ignored.”

Overall assessment

The big political question facing Labour is: will this Budget promote growth? The Office for Budget Responsibility doesn’t think so, saying Reeves’ Budget would leave the average rate of growth over the next five years unchanged.

Former Shadow Chancellor John McDonnell MP was also doubtful, arguing that unless poverty was tackled, long-term growth was not achievable.

The Equality Trust summed up the picture: “The reality of the situation is that this budget wasn’t enough to meet the demands of any of the crises we face.” It called the Budget “a huge missed opportunity.”

Highly regarded Marxist economist Michael Roberts said: “This budget is no game changer for working people – or for that matter for British capitalism.”

Momentum agreed: “The Chancellor missed out on an opportunity to outline a bold, transformative vision to fix a declining Britain.”

And Professor Jeremy Gilbert concluded: “No wealth tax and, apart from the NHS, spending uplifts that will barely slow decline across the public sector. It’s a change of direction; but moving at such slow speed that any actual destination remains wholly hypothetical.”

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