Cost of living, defence, energy, debt, immigration, Brexit and welfare will all test the Government as Wednesday’s Budget nears. Some of the claims made about its record need qualifying.
Andy Burnham entered No 10 in July promising to shake up British politics. A hundred days on, inflation has risen, borrowing is above forecast and Cabinet ministers are publicly divided over immigration. The Government has also taken some early steps on bus fares and electricity bills. Chancellor John Healey delivers his Budget on Wednesday 28 October, with new Office for Budget Responsibility (OBR) forecasts. It is the Government’s first big chance to answer its critics.
Cost of living
Mr Burnham promised to make everyday life cheaper and give the public “breathing space”. He has capped bus fares at £2 from January 2027 and made smaller changes on parking fines and subscription traps. Critics say these do little for families facing high prices.
The Office for National Statistics (ONS) says annual inflation rose from 3.1% in August to 3.5% in September. Transport was the biggest driver, with its inflation rate up from 4.6% to 6.6%, led by motor fuels. Food inflation was unchanged at 1.3%, and core inflation rose from 2.6% to 2.8%. The rise in headline inflation was therefore not mainly driven by food prices. Reports put average petrol at 169.5p a litre and diesel at 192.5p, with the war in Iran blamed.
The £2 bus fare cap has £400m of extra funding. It applies on participating services in England outside London from 1 January to 31 December 2027, and the current £3 cap stays until the end of this year. Passengers paying £3 for eligible single journeys could save a third. The money comes partly from reprioritising the budget of the Department for Energy Security and Net Zero, including turning some international climate finance from grants into loans. Nobody has yet saved anything, because the cap has not begun.
Defence
Mr Healey resigned as Sir Keir Starmer’s defence secretary in June, reportedly because the Treasury would not provide enough money for the armed forces. As Chancellor, he now controls the funding. Critics say he has not yet set out how spending will reach 3% of GDP by 2030, which is reported to cost up to £17.3bn more a year. He is expected to borrow to invest in British defence firms.
On Monday, Mr Burnham confirmed that the Budget will set out a pathway to 3% of GDP on defence by 2030 and 3.5% by 2035. Britain currently spends about 2.6%, according to Reuters. Nato’s wider 2035 target adds another 1.5% of GDP for defence-related security spending. Whether the plan is affordable has yet to be assessed independently.
Energy
The Government has removed VAT on domestic electricity from 1 October 2026 to 31 March 2027. It is estimated to save a typical household about £45 a year, or 86p a week. Gas still attracts 5% VAT.
Ofgem’s price cap rose to £1,723 a year in October, and that figure already includes the VAT cut. The £45 should not be deducted again. Without the cut, electricity bills would be higher than they are. Cornwall Insight forecast on 14 October that the cap would rise to £1,999 for January to March 2027, an increase of £276 or about 16%. That is a forecast, not Ofgem’s decision. Other estimates put it as high as £2,150, but that figure’s source is not clear. Help in the Budget is expected to be limited to the poorest households or those on benefits.
Debt
The ONS says national debt reached £3.005tn at the end of September, about 94% of GDP, compared with roughly 94.7% a year earlier. Borrowing from April to September was £97.8bn, down £4.4bn, or 4.3%, from £102.3bn a year earlier. It is £6bn above the OBR’s forecast. Borrowing in September alone was reported at £24.5bn.
Debt interest cost £10.9bn in September, £1.6bn more than a year earlier. Of that, £4bn was capital uplift on index-linked gilts, which rises with the Retail Prices Index and is generally paid when the bonds are redeemed. It would therefore be misleading to say the Treasury paid out £10.9bn in cash that month. The Government has not published a plan for reducing the debt.
Immigration
Small boat crossings are down on last year, according to the Government, but the boats are bigger, with a dinghy carrying 230 people reported in August. The “one in, one out” returns deal with France has reportedly collapsed.
On legal migration, Home Secretary Shabana Mahmood wants some migrants to wait up to 15 years, instead of five, for settlement, to save the taxpayer billions. Cabinet ministers have publicly voiced opposition, and Mr Burnham is expected to soften the plans. No final policy has been announced, and talk of concessions is not settled policy.
Brexit
Mr Burnham’s recent comments on the European Union have prompted a series of clarifications from Downing Street. On Monday, No 10 said he had ruled out rejoining the EU during this Parliament and that the Government would not reverse Labour’s existing Brexit commitments in this term. It said he is not proposing to restore freedom of movement. He has said he personally hopes Britain might rejoin in his lifetime, which he distinguishes from government policy. A UK-EU summit is due on 20 November, and the Government has not decided whether a major change would need a referendum.
Welfare
Health and disability payments are forecast to cost £90.4bn this financial year. Mr Burnham inherited two reviews: Sir Stephen Timms’s examination of disability benefits and Alan Milburn’s inquiry into nearly a million young people neither earning nor learning. Mr Milburn’s final report was due before the Budget, but has slipped to November at the earliest. Conservative leader Kemi Badenoch accused the Prime Minister of kicking the problem into the long grass. Mr Burnham has previously said he would not put national security ahead of social security. The effect of the delays on public spending in his first 100 days has not been established.
Media profile
Mr Burnham has been prominent on social media, and appeared with Liverpool City Region mayor Steve Rotheram on the charity edition of Gogglebox for Stand Up To Cancer. Asked about the criticism, he said he would “make no apology” for trying to “lead with a bit of lightness”. The appearances are public record, but they are not themselves a measure of what the Government has delivered.
