All Budgets are important, but this one is especially critical: 13 years of market fundamentalist policy choices have left the UK in a state of decay, with a weak economy, falling real wages, a cost-of-living crisis and growing poverty. Our public services are on their knees: our schools are crumbling and even our cherished NHS is struggling to perform. On the environment, our government is doing less than nothing: our rivers and coastal waters are awash with sewage, and the government is backing away from its net zero commitments ‘so as not to deter investors’. We badly need a Budget that will address these issues and help to stop the rot.

Traditionally, most Budget analysis does not look at these broader questions but focuses narrowly on the short-term tax implications of each Budget. We recently wrote an open letter to economics editors of UK media suggesting five rules to show the reality of the Budget’s impact.

Analysing the Budget according to those five rules suggests that this Budget is a disaster for the UK:

  • It will do nothing to promote growth;
  • It will do nothing to help the UK population; and yet
  • It would have been perfectly possible to address these issues.

The Budget prioritises the interests of a small number of very wealthy people at the expense of the UK economy as a whole and most of the UK population.

The Budget Will Not Promote Growth

The size of the economy is measured by GDP, which is defined as the sum of four components. If any one of these grows, that contributes to growth in the economy; and if any one of them shrinks, that constrains growth in the economy. The four components are:

  1. Public (or government) spending; plus
  2. Household spending (or consumption); plus
  3. Business investment; plus
  4. Trade surplus (or a negative figure if, like the UK, you run a trade deficit).

If you wanted to prevent growth, you would take steps to undermine all four of these components. And that is what this government has done over the last 13 years, and what it continues to do in this Budget.

A diagram showing the actions you would take to prevent economic growth

The diagram above suggests that boosting UK growth needs almost exactly the opposite set of actions from those contained in the Budget. The two big items which can drive or constrain growth are Public (ie Government) spending and Household spending – and the Budget will constrain both of those. Hoping that you can restrict the two largest components of GDP and yet somehow create growth is magical thinking of a high order.

All genuine public spending (rather than diversion of public money into private purses as happened on a grand scale during COVID) can contribute to growth but, as our report, The Rational Policy-maker’s Guide to the NHS pointed out, health spending is even more important than some other public services: there is simply no credible route to growth for the UK economy without a strong NHS. The Times Commission on the NHS has picked up on this issue: as Andy Haldane, former Chief Economist at the Bank of England and head of the government’s so-called levelling-up task force, admitted to  the Commission: “For perhaps the first time since the industrial revolution, health factors are acting as a serious headwind to UK economic growth. They are contributing significantly to a shrinking labour force and stalling productivity.”

And yet, the government has provided no real solution to the long-term underfunding of the NHS. Not only is this aspect of the Budget heading the UK for a healthcare disaster, it is also directing us to an economic disaster.

Other areas of public spending fared even worse – in total the real-terms impact of the Budget is to cut the already-stretched public sector by around £20 billion – and the shocking failure to raise benefits in real terms will perpetuate the cost-of-living crisis, ignoring those who most need help.

Most governments have aimed – and managed – to deliver a real-terms increase in earnings so that over time the UK population grows richer; this government has deliberately sought to prevent what Hunt calls inflation-proof pay rises:

“I think we have to recognise a difficult truth that if we gave everyone inflation-proof pay rises, inflation would stay. We wouldn’t bring down inflation.”

And they have succeeded in reducing our pay: the 100-year long trend of real-terms wage increases for British workers has been ended, and Britons are now getting poorer year-on-year. This Budget does nothing to improve that picture. The knock-on impact for personal finances will be dire, and this in turn will constrain household spending.

Did Hunt have a point on inflation, though? No – inflation is, of course, held down by things which are increasing more slowly than inflation and increased by things that are increasing more quickly than inflation. Wages are among the things which have been holding down inflation. But other things, which were under Hunt’s control,  have been increasing more quickly. Specifically, as research by Led by Donkeys reported, the rent that Hunt charges his tenants has been rising at 18%. More generally, the government failed to impose strict price caps on energy (as many other governments did) and other goods and services ‘for fear of deterring investors.’

If there is no growth in household spending, then businesses have no need to invest in growth. As explained in the box below, cuts in business taxes will enrich shareholders but do nothing to drive growth.


What Makes Businesses Grow?

Businesses invest to grow when they believe they will get a good return on their investment. If they have significant spare capacity, they do not need to invest to meet demand. So the conditions for growth are essentially:

1) demand will soon outstrip ability to meet it; and

2) profitability will be high enough to ensure a return above the cost of capital.

Note that these criteria do not include corporation tax rates – something that many politicians seem to think is a key determinant of growth. Why not? Well, most large businesses use discounted cash-flow techniques to assess whether they will get a return on investment. Since the the government has made full expensing permanent, for an equity-funded investment, changing corporation tax rates will have exactly zero effect on businesses growth decisions: a 1% increase in rates will increase the value of the tax allowances and thereby reduce the effective investment by 1% and also reduce the value of the return on investment by 1%, with a zero net effect on rate of return. The same is true for a reduction in tax rates.

What a change in tax rates does achieve is to alter the return businesses receive on investments they have already made.

 A tax cut makes shareholders richer but does not incentivise growth.


And our trade will continue to struggle while we continue to diverge from what always used to be our largest trading partner.

In summary, as the Office for Budget Responsibility (OBR) states, “Real GDP growth is forecast to average 1.5 per cent between 2024 and 2027, 0.6 percentage points weaker than forecast in March.”

It looks even worse when we look at real GDP per person, a more meaningful measure of performance. This is how UK growth compares with other countries that we used to see as our peers.

In short, this is a Budget which will not restore the economy to growth – and therefore not help most people – but as we shall see, it does protect the interests of a few already wealthy people.

The Budget Does Nothing to Help the UK Population

The UK population urgently needs help. Here is how median incomes – the income of the typical earner – have changed over time, after adjusting for inflation.

This chart from the FT which indicates how many British households are now worse-off than their counterparts in Slovenia is rather shocking to most of us who fondly imagined the UK’s peers to be developed countries like France, Germany or Denmark.

What has the government done to address these issues? The answer is, ‘not much.’

There is a rise in the minimum wage, which just about keeps up with inflation. The rate is set to reach two-thirds of median wages (see above) in 2024. Since 60% of the median is the poverty line, a full-time worker on minimum wage – around 1.6 million people – will be around 10% above the poverty line in 2024. While uninspiring, this is far better than Liz Truss’s alternative suggestion of abolishing the minimum wage, so I suppose we should be grateful.

There is also a 2% reduction in the rate of National Insurance on which the OBR commented,

“We expect the 2 pence cut to employee National Insurance contributions announced in the Autumn Statement to directly boost real household incomes per person by around 0.5 per cent by 2028-29. But the effect of the freezes in income tax and NICs thresholds … will result in a significant amount of ‘fiscal drag’. We estimate that higher earnings have raised the direct cost to households from frozen tax thresholds relative to our March forecast by 0.7 per cent.”

In other words, the cut is beneficial to households, but does not compensate for the failure to raise tax thresholds.

Hunt and Sunak plan to save £1 billion by forcing more disabled people to work, or risk losing their benefits. Dame Clare Moriarty, chief executive of Citizens Advice, was quoted in the Financial Times pointing out the reality that “It’s much easier to take payments away from people than it is to build that support infrastructure that enables people to get into work. The rationale that people can work from home doesn’t match up with the vacancies. [The government’s plans] have much more emphasis on the stick than the carrot.”

Rule #2 tells us to remember that people are citizens, not just taxpayers and Rule #3 says we should not ignore wealth and power. So let us consider the impact on working-class Dan and Janice in Bradford, middle-class Susan in Islington, and upper-class Jonathan in Holland Park (though domiciled for tax purposes abroad).

If Dan earns around the median wage, say £30,000 last year and £32,000 this year, he and Janice will gain slightly from the fall in NI payments – around £80 – but the failure to increase the income tax thresholds will cost them around £600, which will more than off-set the gain. Moreover the lack of NHS funding means that they will have to spend almost all their savings to pay for Janice’s hip replacement. The Budget is a disaster for them.

Susan is far better-off: she earned around £100,000 last year and £107,000 this year. The NI change is worth £30 to her, but the freezing of the tax thresholds costs her over £4,000. And she is having to pay higher top-up fees for her father’s nursing home and to find thousands to get private psychiatric help for her daughter.

Jonathan is in a different league altogether: he is a billionaire. His taxable income was only £2 million last year and £2.2 million this year – which means that he pays more NI and more tax. His disposable income is just about keeping pace with inflation. But for a billionaire, this is a tiny part of the story: his investments have risen in value by 10% over the year giving him an unrealised capital gain of £100 million. So Jonathan’s effective tax rate on his total economic income is under 1% – far lower than Dan, Janice, or Susan.

For most people, then, there is little hope for a rise in living standards from this Budget. As the OBR states, “living standards, as measured by real household disposable income (RHDI) per person, are forecast to be 3½ per cent lower in 2024-25 than their pre-pandemic level.”

This is the largest fall in living standards since ONS began keeping records in the 1950s.

It Is Possible to Address These Issues

So we should look at what could be done. As stated above, the answer is to face in exactly the opposite direction from the government’s Budget.

We need – perhaps rather obviously – to boost growth by boosting the four components of GDP.

To talk about boosting public spending has become taboo – the myth that “there is no money” has become so widely spread that many in our media disseminate it. But as we pointed out in Rule #1, it is nonsense – the UK has not been on the gold standard for over 50 years. The government can create money – and it does in huge quantities, via the Bank of England, whenever it really wants to.

The real question is not about money or debt but about real resources: do we have the manpower and other resources needed to drive growth? The OBR states, “In our central forecast, unemployment rises to 1.6 million people (4.6 per cent of the labour force) in the second quarter of 2025. This peak in unemployment is around 85,000 people (or 0.2 percentage points) higher, and a year later, than we expected in March. The weakening in labour demand reflects rising interest rates and slower GDP growth opening up a degree of spare capacity in the economy.” So it may well be that we do not have to worry about tight labour markets.

But to be safe, let us take the hypothesis that the answer is ‘no – the real resources are not currently available.’ (If it is really ‘yes’, then the problem becomes even simpler). In that case, we need to withdraw money (and the real resources it has been consuming) from certain sections of the economy where it will do least good in order to direct it to where it will do most good.

So where could we look? Where could we stop giving away, or failing to collect, public money that would not be harmful? How about:

Further beneficial policies would include taxing capital gains at the same rate as earned income, which could generate a further £30 billion per annum. A wealth tax (which would bring Jonathan’s tax more in line with the rest of the population) is practically difficult to implement, but could raise up to £70 billion per annum.  And what about turning some or all of the £64 billion per annum in government grants to business into equity purchases to build a sovereign wealth fund? As Everett Dirksen may or may not have said, “A billion here, a billion there, and pretty soon you’re talking real money.” These changes are things the government should be doing anyway, and they can free up significant valuable resources for the national good.

Now, of course, identifying these opportunities is far easier than actually plugging all these ‘leaks’ in our financial system. But it is not unreasonable to suppose that £60 billion per annum could be realised from a combination of these sources. That would enable us to spend where it is badly needed, for example:

  • £25 billion per annum to tackle the failing health of the nation: funding the NHS properly, investing in prevention and tackling the social causes of ill-health;
  • £10 billion per annum on infrastructure and green transition;
  • £6 billion per annum for schools;
  • £5 billion per annum to keep benefits ahead of inflation.

An alternative Budget could look like this:

(£ billion)

Per Hunt/Sunak Budget Additional revenue Additional Spending

Alternative Budget


                       1,104                              60






Surplus / (Deficit)


                             60                            (46)



Since the deficit has not increased, there is no reason to fear that the Budget would be inflationary – indeed it should be mildly disinflationary – and therefore no reason to fear interest rate rises. This Budget directly contributes to GDP growth, directly improves the health of the nation (and therefore boosts the workforce), directly helps the most vulnerable households, boosts demand for business and therefore encourages investment. This is a Budget for growth, shared fairly.

We could – and should – be looking at a radically different Budget, which does much more for the economy and much more for the citizens of the UK.


The analyses of the Budget by most of the press are summarised by their headlines below.

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