Budget missed multiple opportunities to boost economic growth
Responding to today’s Budget, Growth Commission member Douglas McWilliams, who was lead author of the Commission’s Growth Budget 2026, said:
“The good thing about Chancellor Healey’s package is that at first sight it is the first Budget under this government to cause only a slight deterioration in the outlook: the higher taxes on savings and the curbing of Business Assets Disposal Relief will damage growth a bit, while there are some minor changes that will be appreciated by Britain’s battered business community.
“But the Budget misses many opportunities to improve the outlook: the ‘Laffer’ taxes that eventually cost more than they raise have not been reduced or abolished; housing and planning remain a mess and additional spending on public house-building will do little when the private sector cannot make a profit from building houses; Britain’s energy costs for business are still £8 billion higher than the average for competitors – and while £400 million of relief is welcome, it will make little difference; employment rights law is still stopping hiring; welfare has still not been reformed; and defence spending is so low that the country’s security is at risk.
“Moreover, although the UK is growing a bit faster than the major EU economies and has lower debt than most, nothing was done in the Budget to reduce the country’s dependence on favourable bond markets – indeed post-budget borrowing will be about £7 billion higher than we previously expected. The economy remains at risk to unfavourable developments in the financial markets. Chancellor Healey may still suffer the fate of his namesake and have to go to the IMF.
“A worrying cloud on the horizon is the EU ‘reset’. Nothing in the Budget diminishes our worries about the costs of aligning with EU sanitary and phytosanitary regulations, the locking in of high energy costs from CBAM and the risks to the UK tech sector – which on latest figures is providing half of UK GDP growth – from accepting EU rules which have done so much damage to the EU’s own tech sector.”
The Growth Commission will perform a detailed analysis of the impact on GDP and GDP per capita in the coming hours.
Earlier in the month, the non-partisan group of fourteen leading international economists who form The Growth Commission published The Growth Budget 2026, setting out a suite of policy recommendations for the government that would boost GDP per capita in the UK in the years to come.
Using bespoke economic models that take into account the dynamic impact of policy changes over time, the Commission set out the measures the Chancellor ought to have announced if he wants to increase economic growth.
