Healey accepts ‘hard decisions’ ahead as thinktank says 2020s set to be worst decade for living standards growth – UK politics live

The Resolution Foundation has now published its full 48-page report on the budget. Some of its main arguments were covered earlier. (See 8.36am.)

Here are five charts from the report illustrating five of its main arguments.

1) The amount the government is spending paying interest on its debt is “high and rising”, the report says. It says:

Debt interest spending is now forecast to reach £147bn in 2029-30, £13bn more than in March. This leaves debt interest spending at 4.1 per cent of GDP in 2029-30 (and peaking marginally higher at 4.14 per cent in 2031-32, the highest on record since 1956-57) and above the total expected spend on universal credit, Housing Benefit and Child Benefit combined in that year.

2) The 2020s are set to be the worst decade, by far, for more than half a century for rising living standards, the report says.

The 2020s are on course to have the lowest growth in incomes of any decade on record when measured using Real Household Disposable Income (RHDI). RHDI is projected to rise by just 1.4 per cent in total over the decade (equivalent to £400 in 2026-27 prices), one-tenth of the growth rate achieved in the 2010s (which itself was the second-worst decade on record). Income growth this decade is set to be much weaker than GDP growth because of rising taxes and import prices.

3) Labour’s cost of living support package benefits the rich almost as much as the poor, the report says.

Taken altogether, the Government’s £4.4bn cost of living package for 2025-26 and 2026-27 is poorly targeted. As Figure 8 makes clear, support is very widely spread. The Household Energy Payment goes to up to 20 million households in England, which are dispersed across the income distribution (87 per cent of the bottom half of the income distribution and 73 per cent of the top live in Council Tax bands A-D). The VAT cut and the Fuel Duty delay are not targeted at all. Taken together, we estimate that 52 per cent of the whole cost of living package will benefit the poorest half of the income distribution this year and next, with the other 48 per cent going to the top half (equivalent to an average £158 for poorer households, compared to £144 for richer households).

4) But, overall, the tax and benefit changes since the government took power have been progressive, the report says.

We estimate that annual incomes will, on average, be £320 higher for households in the bottom quintile in 2029- 30, compared to £2,000 lower for those in the top quintile as a result of the Starmer and Burnham governments’ measures. This is largely the result of policies announced before this budget: the repeal of the two-child limit and the commitment to uprate the universal credit standard allowance at a higher rate than inflation for four years, both introduced from April 2026.

5) All government spending departments apart from defence, health and education are likely to face cuts in spending per head from the end of this decade under current plans, the report says.

At the Downing Street lobby briefing, the PM’s spokesperson was also asked if John Healey’s comments about the EU in a GB interview this morning (see 12.14pm) were out of line with Andy Burnham’s. No, was the answer. The spokesperson said:

The position of the government, and the prime minister and the chancellor, is that a stronger relationship with our closest neighbours is in our national interest.

Healey did not say anything that contradicted Burnham’s views on Brexit. But if Burnham had been asked the GB News questions, he would have stressed the problems with the current EU relationship. Healey, instead, said “we’ve got a Brexit decision” and stressed the importance of making the best of the current arrangements.

Downing Street has said John Healey was not committing to cutting welfare spending before the general election in his Today programme interview this morning. (See 9.23am.)

Although one answer he gave to a question could be interpreted as saying that, the PM’s spokesperson said that was not Healey’s message. The spokesperson said:

We’ve never set an arbitrary target or timetable [for when the welfare bill starts to fall]. But both the prime minister and the chancellor have been crystal clear that the welfare bill needs to come down, and that we need to do that in a progressive and sustainable way and not through crude cuts which push people into hardship and puts pressure on the system elsewhere.

Asked if Healey mis-spoke in his interview, the spokesperson said:

The chancellor is completely in line with what the PM has said over the last few months that the welfare bill needs to come down and, as I say, we are not setting an arbitrary target or timetable on that.

The spokesperson said the government would be publishing Alan Milburn’s report on youth unemployment and Stephen Timms’ report on the personal independence payment (Pip), and that these would be followed by a white paper on welfare reform published next year. That will be followed by legislation.

Kemi Badenoch has described the Treasury clarification that John Healey is not promising to cut the welfare bill before the general election (see 9.23am) as “astounding”. In a response on social media, she said:

This is astounding. The government’s own figures show working-age welfare will go up by £60 BILLION by 2030, yet the Treasury has to rush out and correct the Chancellor to say there is no timetable for cutting the benefits bill. Looks like foot in mouth syndrome is spreading.

John Healey couldn’t even find £10 billion to get defence spending to 3% of GDP - the thing he quit over.

Don’t let anyone tell you this was a ‘do no harm budget’. In doing so little, Labour have harmed our economic security and they’ve harmed our national security.

Selling nicotine-free vapes to children under the age of 18 has become illegal from today, the government has said.

Children were already banned from buying vapes containing nicotine. But, under the Tobacco and Vapes Act, shops across the UK will now be banned from selling nicotine-free vapes, and nicotine pouches, to children.

In an article for the Daily Mirror welcoming the new law, Prof Sir Chris Whitty, the chief medical officer for England, said:

Vaping can be a way to help established adult smokers who are already addicted to nicotine from tobacco to swap to a less dangerous product. Vaping is considered safer than smoking, but that is a low bar. Vapes should therefore never be used by children or non-smokers.

Some children have already come to harm from bad reactions to vapes. The long-term health harms of vaping in today’s children will only become clear over time. They are however unlikely to be good; inhaling multiple, often heated, chemicals into the lungs may well do irreversible harm.

According to the Department of Health and Social Care, which has put out a new release about how the ban will operate in England, “more than a million children are estimated to have tried vaping, with more than 370,000 vaping regularly, putting them at a higher risk of developing respiratory illnesses.” Scotland, Wales and Northern Ireland are also implementing bans.

As Peter Walker reports, Andy Burnham has written to cabinet ministers telling them that, as he opens a national debate on improving the UK’s relationship with the EU, he does not want them to “advocate for specific options or opine on the likely outcome of the process”.

John Healey stuck to this in his interviews this morning. But, speaking to GB News, he did hint that he might not be 100% enthusiastic about taking the UK back into the EU single market after the next election.

When Christopher Hope, GB News’ political editor, put it to him that more than two thirds of voters in Rawmarsh and Conisbrough, Healey’s south Yorkshire constituency, voted for Brexit and would not be happy with rejoining the single market, Healey replied:

No, freedom of movement is not on the agenda, and certainly for this parliament it’s ruled out.

Healey said the government would be having “a bigger discussion about how we get a better Brexit deal”. Asked if he would favour joining the EU, with freedom of movement, if that helped the economy, he replied:

No, I’m in favour of accepting that we’ve got a Brexit decision. And I’m in favour of the job we need to do now, which is to make the best of the terms we’ve got.

In his interviews this morning John Healey pushed back a bit against the claims that his plans are based on unrealistic assumptions about spending cuts. (See 11.29am.) Speaking to Bloomberg, he said “hard decisions” would be needed. He said:

My cabinet colleagues are demonstrating that they can also exert fiscal discipline and spending control, and we will take that into the spending review.

But the spending review will be framed by the priorities that we set in the 10-year plan for Britain, that’s as it should be.

Hard decisions about the top priorities for Britain in the years to come, judgments that then follow about how we fund them.

Here are some more lines from Helen Miller’s presentation about the Institute for Fiscal Studies’ assessment of the budget. (See 10.45am.)

Miller said higher inflation means John Healey would need at least £17bn to avoid real-terms cuts in some government departments under the long-term spending plans. Echoing a point made by the Resolution Foundation (see 8.36am and 10.21am), she said:

The chancellor left plans for overall departmental spending across the rest of the parliament broadly unchanged in cash terms. In the face of higher inflation, this means that the real-terms value of budgets has been cut. Taken at face value, and alongside the inherited plans to slow down spending growth sharply in coming years, that is a big choice. It effectively implies that some public services will see real-terms cuts in next year’s spending review. Avoiding the cuts implied by both higher inflation and tight envelopes could plausibly require a top-up of £17bn in 2030-31. That’s true even before thinking about the £11bn needed to fund defence plans.

She said she did not believe Healey would implement the future spending cuts implied by his departmental spending plans. She said:

I want to be clear that my concern is not that it would be impossible to deliver the implied cuts to other services – that could be done. But I’m sceptical that this government would be willing to do it. I’m also sceptical because I didn’t hear John Healey starting the kind of pitch-rolling that you would expect if he intended to deliver these spending plans. And I’m sceptical because history advises scepticism. When chancellors pencil in tight spending plans in the future, they tend not to deliver.

She criticised Healey for raiding the reserves to fund the defence investment plan. She explained:

I’m grumpy about how the chancellor decided to fund the relatively small hole in the defence investment plan – that’s the plan that gets defence spending to 2.7% of GDP next year and keeps it there until 2029–30. Much of it came from further cuts to the capital budgets of other government departments. Fine. Priorities change. But the rest came from raiding reserves in future years. This is worth drawing out: John Healey has now spent 25% of the capital reserve set aside for the next three years. He’s also spent 40% of the day-to-day reserve. This is categorically not what the reserves are for. Drawing down reserves is another way that the government has reduced its buffer against future shocks.

She said it was “sad” that the government was having to decide who should get energy support based on council tax bands that are based on property values 35 years ago. She said:

It is also sad that, in the time since the last energy price surge, the government hasn’t bothered to invest in the data that would have allowed a package more targeted at those most badly hit by rising energy prices. But here we are.

She said Healey was at risk of needing to put up taxes next year. She said:

I am left with the impression that the chancellor is hoping the economic forecasts improve enough that he can make good on his plan to cut borrowing without having to also make large cuts to public spending or raise taxes. I hope that happens. And it might – a re-opening of the strait of Hormuz or AI-driven productivity growth really could create sunnier skies. But, equally, things could get worse. If they do, the chancellor now has less insurance.

A clear short-term risk with the chancellor’s choices is that next year – with low headroom and a spending review that looks pretty brutal for some departments – we see another season of damaging speculation about tax rises.

Helen Miller, director of the Institute for Fiscal Studies thinktank, is giving a presentation summing up the IFS’s view of the budget. Arguing that it contained plenty of “bad things” as well as welcome measures, she singled out founders’ relief for particular criticism.

After years of arguing that business asset disposal relief was a bad idea – and just when I thought the relief was on its last legs – a new, similar relief has popped up. The new founders’ relief looks bonkers. It gives a lower rate of capital gains tax to a small subset of people with large gains. That will include some entrepreneurs that make investments with broader societal benefits – although most of that activity would have happened without the relief. But it will also include people that just got lucky. There are very complex rules around who gets it – rules that will incentivise people to change their behaviour in weird ways simply to be able to get the relief. I could go on. But the punchline is that this looks to me like yet another tax break for a chosen group with little economic reasoning behind it.

Since the start of 2025 Reform UK has been ahead of the Conservative party in the Politico poll of polls, a tracker which averages how the political parties are in surveys carried out by all the main polling organisations. Different polling companies use different methods, and so the poll of polls provides a reliable overview. Other poll of poll trackers are available, but Politico’s may be the most widely read in Westminster.

And today it has good news for the Conservatives. For the first time since early 2025, they have regained their lead over Reform UK.

John Healey has denied postponing difficult decisions on the welfare system, insisting the government is making changes “now”.

Thinktanks and opposition parties have made this claim. But, when this was put to Healey in an interview on GB News, he replied:

This was a broken system. And two years ago we started putting back in place face-to-face assessments. We’ve changed terms of universal credit, so people don’t have to brand themselves as too sick to work.

So, those are changes we’re making now. But in the long run, as I’ve argued, and the prime minister has said, too, we have to bring the cost of benefits down.

John Healey is rowing back from his answer in an interview in the Today programme implying he wanted welfare spending to go down before the next general election. According to Chris Mason, the BBC’s political editor, Treasury sources are saying his words have been over-interpreted.

This relates to what Healey said in an interview with Nick Robinson for the Today programme. It was broadcast this morning, but recorded yesterday, and the BBC has written it up in a story on its website headlined: “Healey promises reduction in welfare bill before next election”.

For the record, here is the key exchange.

Robinson: Let’s take welfare if we could. £19bn up in the year ahead. That’s the entire police budget for England and Wales. That’s the entire annual defence equipment budget. And yet in your speech you said, well, we’ve got a couple of reports coming next month, then we’ll have a white paper, which in non-Westminster jargon means a consultation, then you’ll have some legislation, then you’ll have a row in the Labour party. You’re not going to make any of these cuts before the next election, are you?

Healey: Well first, I’ve said clearly, the prime minister said as well, we have to bring the benefits bill down. You don’t do that by crude cuts, especially when people are feeling the cost of living pressures. We do have a big report, two big reports being produced next month, that will help us map out the way that we need to change the system for the long run. We are in fact reducing and have been over the last two years the rate of increase in the welfare bill compared to the previous period – I’m afraid to say – of a broken system the Conservatives put in place. We’re bringing back and have brought back face to face assessments which they axed for instance. We’ve been changing universal credits so people aren’t branding themselves as too sick to work in order to make that system work better.

Robinson: But you’re reducing the rate of increase in welfare spending chancellor aren’t you? But the OBR’s forecast is that £1 in every £8 will be spent on welfare by 2030 or thereabouts. You’ve got to make cuts, haven’t you?

Healey: This system is unsustainable. I’ve been clear about that. The prime minister’s been clear about it ….

Robinson: Briefly, because I want to give you the chance to talk about other things – there will be cuts in welfare before the election?

Healey: There will be there will be a reduction in the benefits bill. We’ll do that in a Labour way and we will do that because it is simply not good for Britain or progressive to have a bigger and bigger benefits bill and I feel a moral duty to deal with these youngsters who at the moment have been written off by previous governments.

The answer highlighted in bold is what gave the BBC its story. Healey paused slightly between the first “there will be” and the second “there will be” and it would be perfectly reasonable to interpret it as:

There will be. [Direct answer to Robinson’s question.] There will be a reduction in the benefits bill [etc etc – Healey expanding on the answer.]

But the Treasury is implying what he meant was:

There will be, there will be a reduction in the benefits bill [Healey simply repeating three words as he launches into more general answer, not answering Robinson directly, but just explaining the government’s approach.]

Reasonable people could interpret is either way. But Mason said the Treasury had told him the first interpretation was not accurate, and that if Healey really wanted to commit to getting cutting the benefits bill before the general election, he would have announced that in the budget.

Given that Alan Milburn himself has said that his plans to tackle youth unemployment may require more spending upfront in return for savings later, and given that welfare reforms often take most of a decade to roll out, it does seem unlikely that Healey intended to say the benefits bill would be cut before the election.

But, as Mason pointed out on the Today programme, “correcting” this story means the Treasury is implicitly saying benefit spending won’t go down before the election – which is very helpful to the Tories and Reform UK.

Good morning. The day after the budget is often the moment when big initiatives announced by the chancellor the day before with a flourish start to unravel as experts pore over the small print. There is not much of that happening this morning – mainly because John Healey did not have any really big initiatives up his sleeve. Compared with a normal budget, his tax and spending initiatives were mostly relatively minor. That means that the opposition parties have been struggling to find things to attack, and so instead they have resorted to criticising Healey for what he did not do: slash welfare (the Tory/Reform UK solution), or join the EU’s single market (the Lib Dems’).