Professor Matt Padley, Co-Director of the Centre for Research in Social Policy (CRSP):
- £100 council tax payment, parental pay, Carers Allowance, rough sleepers
The £100 ‘energy’ payment will help some people, as will getting rid of the standing charge on gas, but as with a lot of these other 'everyday fixes’ it probably won’t be felt by many households, and doesn’t relieve a lot of the pressures on household finances.
Extending parental pay is a welcome move, although there are still questions about the value of this and whether or not this will be taken up by self-employed partners and dads. Similarly, getting rid of the cliff edge for those receiving Carers Allowance is a long-overdue move, but relies on a new system being designed and put in place to manage this, and won’t put an end to the DWP claiming back ‘overpayments’ from those carers affected by this cliff-edge now.
The commitment to ending rough sleeping is backed up with more funding and while this doesn’t affect most people living in the UK, I think it does reveal something about the kind of ‘vision’ that might be underpinning Labour’s thinking, and what kind of society they want to create.
Looking after some of the most vulnerable in society, giving clear routes to a roof over their head in the winter, could easily have been sacrificed for something that helps a greater number of households. Maybe after a decade and more of a lack of clear vision or direction for the UK, this starts to point to some kind of moral imperative within politics and policy?
Professor Alistair Milne, of Loughborough Business School:
- Interest rates, bank surcharge, corporate tax rates
An understandable move, but not going to transform UK public finances.
Higher interest rates allow banks to earn higher revenue from lending and other financial assets. For this reason bank profitability has risen substantially along with the rise of interest rates since the pandemic, now of the order of £50bn per year. This makes banks a tempting target for the Chancellor of the Exchequer.
The bank surcharge, through which some additional tax revenue is now being raised, is part of the broader political decision about the level of UK corporation tax. It is a higher rate of corporation tax paid only by banks. The bank surcharge was originally introduced in 2016 at a rate of 8%, justified by the commitment of the government to use tax payer money to support failing banks, at a time when general corporate tax rates were being reduced. It was subsequently reduced to 3% in 2023, when the May/Sunak administration increased the corporate tax rate from 19% to 25%.
[The 2023 increase in corporate tax rates was a reversal of a long term trend, UK corporate tax rates were substantially reduced from 1980 to 2022, from over 50% to less than 20%, under both Conservative and Labour administrations, often accompanied by reductions in allowances through which companies can offset investment and other expenses against corporation tax, though allowances have been instead increased in recent years. The goal has been to support innovation and international competitiveness.]
The bank surcharge is now being raised to 6% for the next 15 months, even though corporate tax rates remain unchanged. The concern of the banking industry is that this higher rate of tax may discourage them from providing the loans to businesses, needed to support economic growth. Not clear that this will be a big impact, but the increase will certainly benefit non-bank lenders, who are less closely regulated than the banks.
Difficult to raise much beyond 6% without having unintended consequences for credit provision. It will also not raise that much extra money, the increase will bring only around £1.5bn additional money for the Chancellor. Small change compared to the annual NHS spending of around £200bn.
Dr Anthony Kevins, of Loughborough International Relations, Politics and History:
- Devolution and the Power of the Purse
While it might fly under the radar for some, the Budget’s “roadmap to fiscal devolution” could be a major turning point in the balance of power across England.
Some of what’s laid out is of course a story of continuity with the Conservative government, with at least a dozen new devolution agreements and strategic authorities in the works.
Yet the most striking developments are those tied to increasing the capacity of local leaders to raise revenue – most notably via income tax assignments, overnight visitor levies, and business rates.
Without such measures, local leaders are forced to rely on central government funding to pursue their initiatives.
That raises several issues. Central governments tend to want local initiatives to reflect their own policy priorities, rather than those of local leaders. They may be tempted to privilege areas of the country where funding is most likely to turn into additional seats at the next election.
And they typically seek to take credit for any positive consequences of that funding, in the process blurring accountability and undermining the very purpose of these elected roles.
Increasing local leaders’ “power of the purse” is therefore key to a more effective decentralised political system. If done properly, fiscal devolution could increase policy innovation across the country, improve the fit between what voters want and what their local leaders deliver, and reinforce the legitimacy and autonomy of mayors and strategic authorities.
Dr Afzal Ashraf, of Loughborough International Relations, Politics and History:
- Defence
The Budget closes the £4.7 billion gap in the Defence Investment Plan’s £15 billion uplift through reallocations and reserves. That uplift sits within approximately £298 billion of Ministry of Defence spending over four years; £298 billion is not all new money. Planned investments include £5 billion for drones and autonomous systems, £11 billion for munitions and weapons, and £8.6 billion for the Global Combat Air Programme. These are substantial commitments to replenishment and transformation.
The distinction between funding a programme and meeting defence needs nevertheless remains. Which threats must Britain be able to defeat, over what period, and with what assistance from allies? Will the plan produce forces with sufficient personnel, training, maintenance and ammunition to sustain operations? How will investment in future technologies address vulnerabilities before those technologies mature? A funded procurement programme does not mean adequate defence – it can still leave an inadequately prepared force.
The spending trajectory does not settle these questions. Existing plans reach 2.7% of GDP in 2027–28; the Budget sets a target of 3% in 2030 and reaffirms 3.5% by 2035. NATO’s wider commitment is 5%, comprising at least 3.5% for core defence and up to 1.5% for broader security and resilience. It also requires credible annual pathways towards capability targets. Percentages are useful measures of allied effort but not of performance because they cannot establish whether particular forces are capable and ready.
The strongest criticisms concern this gap between promise and delivery. Defence Committee chair Tan Dhesi welcomed the immediate funding while warning that key decisions had been delayed and that adversaries do not follow spending cycles. Writing for RUSI, Bee Boileau and Max Warner explain that postponing increases can leave capabilities weaker even when the eventual percentage target is reached. They also identify substantial uncertainty in planned efficiency savings. Unachieved savings would require additional funding or reduced delivery.
Funding has always been a challenge in defence. It is now an increasing challenge, with mounting debt and rising interest rates. Britain’s public sector net debt stood at approximately £3 trillion, or 94% of GDP, in September. Today’s Office for Budget Responsibility forecast puts it at 95.5% in 2026–27, rising to 97.3% in 2028–29 before declining. The OBR forecasts central government debt interest, net of the Asset Purchase Facility, at £123.9 billion in 2026–27, £14.5 billion above its March forecast. Defence does not explain this entire trajectory but it does not help the financial situation and finances are progressively unable to help defence.
Private finance offers no automatic escape. The Budget proposes up to £5 billion of investment and lending through the National Wealth Fund and British Business Bank across defence and related sectors. Helen Miller’s immediate IFS response questions how far investment in defence companies translates into additional British military capability. Factories need orders; forces need usable equipment. Meanwhile, debt costs, NHS demand and welfare pressures constrain the resources available.
ENDS