London Daily

Focus on the big picture.
Tuesday, Jun 23, 2026

There's a feel-bad factor coming, and this budget won't help

There's a feel-bad factor coming, and this budget won't help

It may have been a return to normality after the shocks of the last few years, but today's measures will not remedy the enormous problems facing Britain.

We'll get to the economics in a moment but let's reflect first of all on perhaps the most remarkable thing about this budget. Which is that this was, just about, a "normal" budget - the first "normal" budget in three years.

Think about it: first, there was COVID, during which the normal rules about economic policymaking dissolved away. Enormous giveaways (most obviously the furlough scheme) took place on the hoof, accompanied by few figures and no red book.

Then came Liz Truss's astounding mini-budget and Jeremy Hunt's equally surreal autumn statement which essentially undid everything that came before it.

Tot it all up and we haven't had anything resembling regular fiscal policy - which is to say six monthly sets of strategic tax and spending changes accompanied by robust, detailed economic analysis - for a long time. If today's event felt somewhat boring, it was in part because what came before it was so intense.

The big picture for the UK economy is a little bit better than last time around.

That might sound encouraging, until you recall that the outlook last time around was utterly grim: the worst two years for household disposable income in modern record; an enormous squeeze in the cost of living, augmented by a rise in certain taxes as the government sought to repair the mess of the mini-budget.


On the basis of today's budget, the UK should just about skirt clear of a technical recession (two successive quarters of contraction), but will do little more than flatline for most of this year.

Household disposable income will not contract by as much as expected last time around, but this year and next will still be the worst for families' finances since at least the 1950s. Things are looking better, but still bad.

Nor is there much sign that the measures contained in today's budget will move the dial that much. In one respect this is a little strange since many of the measures here might be considered textbook "pro-growth".

There's the increase in provision of childcare, which should help encourage more young parents back into the workforce.

There's the increase in the pensions lifetime allowance which should help encourage well-off older workers to get working again.


Then there's the biggest of all the measures - full expensing, whereby businesses can offset their investments against their tax bills. This is precisely the policy business groups have been calling for for years, claiming it would boost investment and hence drive forward productivity.

Yet tot up all these measures and, according to the Office for Budget Responsibility, they raise economic growth by a measly 0.3 per cent at their peak, before dropping back eventually to zero.

Part of the reason is that some of these policies are time-limited - most notably full expensing which is technically only due to last for three years. The Treasury says it wants it to be permanent, only at the moment, it can't quite afford it.

That's not, it should be said, because of any concrete limitation on its ability to spend but because of its self-imposed fiscal rules, which are far less of a constraint than you might imagine.

Anyway, the upshot is that the OBR thinks the growth boost delivered by all this effort is quite small.

Then again, the OBR's forecasts are considerably more optimistic than the Bank of England, which thinks that far from rebounding rapidly, the UK is likely to see economic growth flatline for the coming years, barely making good any of the income foregone in recent years.

Put it all together and it's hard not to conclude that this was primarily a technical budget.

There are bits and pieces in there for households - the retention of the £2,500 energy price guarantee level, the childcare provisions and the pension tax-free allowance (primarily for the better-off) - but it's hard to see how any of this can remedy the enormous financial crunch most households are going to face in the coming months.


They will see inflation continuing to bite, they will feel the impact of higher interest rates and they will see ever greater chunks of their income going to the exchequer (as a result of the freeze in tax-free personal allowances announced last autumn).

It is the opposite of the "feel-good factor" - the feel-bad factor.

And the budget did nothing to remedy this. It did nothing to remedy the problems young people face in trying to get on the housing ladder. It did nothing to provide a coherent response to Joe Biden's Inflation Reduction Act.

Then again, there are still two big fiscal events left before the likely date of the next election, late next year. If there's a splurge coming it's likely to happen then.

Newsletter

Related Articles

0:00
0:00
Close
Taxpayer Support Grows for Higher Digital Levies on Multinational Tech Companies
Bank of England Signals Caution Over Inflation Despite Easing Energy Prices
Lloyds Banking Group Expands Artificial Intelligence Hiring Amid Sector-Wide Automation Shift
Film Producer Corporate Collapse Leaves Creditors Facing Unrecoverable Losses
UK Ten-Year Brexit Anniversary Highlights Ongoing Political and Economic Uncertainty
Nottingham Maternity Scandal Inquiry Reveals Systemic Failings in NHS Care
Met Office Heatwave Prompts Public Health Warnings Across United Kingdom
Concerns Rise Over Fiscal Stability as Political Uncertainty Weighs on UK Borrowing Costs
UK Taxpayers Back Higher Digital Taxes on Global Technology Firms, Survey Shows
Bank of England Holds Interest Rates Steady Amid Persistent Services Inflation
Reform UK and Opposition Leaders Call for General Election Following Starmer’s Departure
Ten Years After Brexit Referendum, UK Faces Ongoing Political Fragmentation and Economic Debate
Nottingham University Hospitals Maternity Inquiry Exposes Severe NHS Failures
Met Office Issues Heat Health Alerts as United Kingdom Faces Record-Breaking Temperatures
Andy Burnham Emerges as Front-Runner for Labour Leadership After Starmer’s Resignation
Keir Starmer Resigns as UK Enters New Phase of Political Leadership Transition
UK Expands Alcohol Ban Enforcement Using Tagging Technology Ahead of World Cup
UK Invests £50 Million in Critical Minerals Supply Chain Security
UK Appoints Special Envoy on Preventing Sexual Violence in Conflict
UK Introduces Fines for Landlords of Unsafe Rental Properties
Reform UK Leads Opinion Polls as Immigration Debate Reshapes UK Politics
Police Investigate Edinburgh Attacks as Potential Hate Crimes
King Charles to Publish Personal Tax and Royal Household Financial Records
Nottingham University Hospitals Maternity Inquiry Report Set for Publication
Heat-Health Alerts Issued Across London and Southern England Amid Rising Temperatures
UK Economy Shows Pressure From Middle East Conflict Despite Modest Growth
Brexit Anniversary Reignites Debate Over UK Economic and Political Direction
UK Parliament Continues Legislative Work Amid Leadership Transition
Financial Markets Hold Steady After UK Leadership Shake-Up
Andy Burnham Enters Labour Leadership Race With Strong Parliamentary Backing
Keir Starmer Resigns as UK Prime Minister After Two Years in Office
Reform UK MP Lee Anderson to Raise Pension Concerns Over British Coal Staff Superannuation Scheme
UK Parliament to Debate Newborn Screening for Spinal Muscular Atrophy Following Public Petition
Met Office Warns of Water Safety Risks During Heatwave as Temperatures Peak in England
Treasury Increases Mileage Allowance Payments for 2026–27 Tax Year to 55 Pence Per Mile
UK Government Raises Electricity Generator Levy to 55 Percent in New Revenue Measure
House of Lords Moves Financial Services and Markets Bill to Committee Stage Amid Regulatory Scrutiny
Westminster Hall to Debate Petition on Pro-Israel Influence in UK Politics
UK Parliament Prepares for Estimates Days Debates as Backbench Business Schedule Approved
Armed Forces Bill Nears Final Stages in UK House of Commons With Military Justice Reforms
Donald Trump Comments on UK Political Situation, Citing Immigration and Energy Policy Concerns
Andy Burnham By-Election Victory Fuels Speculation Over Potential Labour Leadership Contest
UK Economy Shows Resilience but Faces Headwinds from Middle East Tensions, UK Finance Says
UK Parliament Opens Week of Debates on Net Zero, Security and Armed Forces Reform
Met Office Issues Amber Extreme Heat Warning as Temperatures Expected to Reach 35C Across England and Wales
Prime Minister Keir Starmer Faces Mounting Leadership Pressure After Makerfield By-Election Defeat
London Hotel Wins World’s Best Afternoon Tea Award at International Hospitality Guide La Liste
Court of Appeal Rules in Favour of Competition and Markets Authority in Phenytoin Drug Case
Chichester Waste Site Suspended After Environment Agency Finds Serious Fire and Pollution Risks
UK Appoints Chris Elmore as Special Envoy on Preventing Sexual Violence in Conflict
×