Skip to main content Visit the UK Parliament website House of Lords Library Toggle main navigation Home Research by topic Collections About us Subscribe Search UK Parliament House of Lords Library In Focus UK fiscal outlook: September 2026 UK fiscal outlook: September 2026 In Focus Published Thursday, 03 September, 2026 In Focus Economy Welfare & Pensions James Forrester The UK fiscal outlook is expected to remain challenging as rising borrowing costs could reduce government headroom against its fiscal rules. Spending remains above pre-pandemic levels and the tax take is forecast to reach a historic high within five years. The Burnham government said it would honour Labour manifesto commitments on tax but has promised reform in several areas—such as adult social care—that could add to spending pressures. Table of contents 1. Key points skip to link 2. Economic and fiscal outlook skip to link 2.1 Economic conditions skip to link 2.2 Public spending skip to link 2.3 Taxes and other government revenue skip to link 2.4 Government borrowing and public debt skip to link 2.5 Long-term outlook skip to link 3. Government fiscal policy skip to link 3.1 Current fiscal rules skip to link 3.2 Public spending skip to link 3.3 Taxes skip to link 4. Commentary skip to link 4.1 Opposition parties skip to link 4.2 Other commentary skip to link 5. Read more skip to link Approximate read time: 30 minutes The House of Lords is scheduled to debate the following motion on 10 September 2026: Lord Bridges of Headley (Conservative) to move that this House takes note of the UK’s fiscal outlook. 1. Key points Public spending remains above 2019/20 pre-pandemic levels and the ‘tax take’ is forecast to increase to a historic high over the next five years. The national debt is almost £3tn, nearly triple the 2008 pre-financial crisis level as a share of gross domestic product (GDP) and almost double the advanced economy average. Without policy changes, the national debt is forecast to rise above 275% of GDP over the next 50 years, driven mainly by the fiscal pressures of an ageing population. The Burnham government has said it will stick to the fiscal rules adopted by the Starmer government. However, government borrowing costs have been rising, which could reduce the government’s ‘headroom’ against these rules. The prime minister said he would honour the Labour Party manifesto commitment not to increase income tax, national insurance or value added tax (VAT). He also pledged to reform adult social care and has made commitments on defence which could imply future spending. The Conservative Party has criticised the government for high levels of government borrowing. It identified £47bn of savings (around half of which would come from welfare) which it said it would use to cut the deficit and lower taxes. The Liberal Democrats have called for the “anti-growth” Treasury to be replaced by a new department for growth. Reform UK has pledged welfare reforms that it said would save £50bn. The Green Party has called for wealth taxes. The Institute for Fiscal Studies said the government faces tight fiscal constraints and a series of difficult decisions. It described the government’s intention to retain the existing fiscal rules as sensible. The Institute for Public Policy Research said the UK was not on a fiscally sustainable track, describing the fiscal rules as short-sighted. The Centre for Policy Studies argued for a fundamental reconsideration of the role of the state and for pro-growth reforms. 2. Economic and fiscal outlook 2.1 Economic conditions The Office for Budget Responsibility’s (OBR) most recent economic and fiscal outlook was published in March 2026.[1] It noted that a decade of “subdued” economic growth following the global financial crisis had contributed to slow growth in living standards and a “challenging fiscal position”.[2] Since the initial recovery from the coronavirus pandemic, real growth in the UK’s gross domestic product (GDP) has been persistently weak.[3] The OBR projected some improvement in productivity and GDP growth over its five-year forecast to 2030/31, but said the UK fiscal outlook over the year 2026/27 would “remain challenging”.[4] The OBR acknowledged the uncertainty in its forecast due to several issues, including international tariff policy, productivity growth and pressures on public spending. In addition, the OBR’s forecast was prepared before the escalation of the conflict in Iran. It said the situation in the Middle East could have “very significant impacts on the global and UK economies”, particularly due to increased energy prices.[5] The International Monetary Fund (IMF) and the Organisation for Economic Cooperation and Development (OECD) also said the conflict would have a negative impact on economic growth in the UK. In its UK country report published in July 2026, the IMF said the UK economy had been “gaining momentum” before the conflict but that “the fallout from the war […] pushed energy prices higher and has weighed on the outlook”.[6] It said this would erode real incomes, adding that “weak productivity gains continue to weigh on long‑term growth”.[7] It said UK growth was expected to slow in 2026 “before recovering as the energy shock dissipates”.[8] The OECD’s June 2026 economic outlook report noted that UK consumer confidence had fallen since the start of the Iran conflict.[9] It said there was “upward pressure” on borrowing costs for both households and the government and that labour demand continued to slow, “especially in sectors most exposed to higher minimum wages”.[10] It also noted high levels of health-related inactivity.[11] The OECD said it expected growth to “moderate temporarily” in 2026.[12] It said there was “limited fiscal space” for the government to ease the impact of higher energy prices on low-income households and that this added a “downside risk to output”.[13] It said the UK was vulnerable to volatility in global energy markets from a combination of factors, including dependence on natural gas for energy generation and low storage capacity. It said renewed imported price pressures were interrupting a “gradual decline” in consumer price inflation.[14] 2.2 Public spending Public spending as a share of GDP remains above 2019/20 pre-pandemic levels and is expected to remain around this level over the next five years, based on the plans inherited by the Burnham government. Total public spending in 2025/26 was £1,360bn (44.3% of GDP).[15] The OBR expects this to increase slightly to 44.9% of GDP in 2027/28, before returning to 44.3% of GDP in 2030/31.[16] This would be 5.2 percentage points higher than the 2019/20 pre-pandemic level. Just under half of public spending (47%) was covered by ‘departmental expenditure limits’ (DELs) in 2025/26, with the remainder (53%) considered ‘annually managed expenditure’ (AME).[17] DELs cover spending which is subject to limits set in spending reviews and which it is assumed government departments can control.[18] AME covers “demand-led spending” such as welfare and debt interest payments which are more difficult to control and forecast.[19] The breakdown of these spending categories and how they are expected to change over the next five years is outlined below. 2.2.1 Departmental expenditure limits Despite plans for an increase in departmental spending over the next two years, many departments could face difficult spending settlements because of rising health needs and commitments to spend more on defence. There is also pressure on the education budget from rising special educational needs and disabilities spending. Other spending risks include further strikes by resident doctors; certain proposed efficiency savings announced at the spending review and November 2025 budget not being realised as expected; and continued asylum accommodation pressures for the Home Office.[20] Most spending covered by DELs (£512bn in 2025/26) is spent on the day-to-day costs of providing public services, grants and administration (known as ‘resource departmental expenditure limits’ or ‘RDEL’).[21] The largest budgets for day-to-day spending by departmental group in 2025/26 were health and social care (£204bn), education (£90bn) and defence (£39bn).[22] Despite planned spending increases over the next two years, the director of the Institute for Fiscal Studies (IFS), Helen Miller, said many departments would face cuts under current plans if the NHS “continues to receive the relatively generous settlements to which it has become accustomed”.[23] The remaining £128bn covered by DELs was spent on capital investment (‘CDEL’) in 2025/26. This includes spending on major defence equipment, infrastructure such as roads and buildings, and loans to businesses and individuals. The largest capital budgets by departmental group were defence (£23bn), transport (£21bn) and science, innovation and technology (£14bn).[24] The IFS has argued that investment through capital spending can be important not just because it supports the delivery of public services but also because of its role in “shaping wider economic growth”.[25] As a share of GDP, spending within DELs is expected to increase from 20.9% of GDP in 2025/26 to 21.3% of GDP in 2027/28, before falling to 20.7% of GDP in 2030/31.[26] In real (inflation-adjusted) terms, day-to-day spending is expected to continue rising but capital spending is forecast to fall beyond 2028/29. The following chart shows historic real departmental resource and capital spending (in 2025/26 prices) from 2010/11 to 2025/26 and its forecast to 2030/31. Figure 1. Real departmental resource and capital spending (£bn, 2025/26 prices), 2010/11 to 2030/31 (outturn and forecast) (Office for Budget Responsibility, ‘Economic and fiscal outlook’, March 2026, p 61.) 2.2.2 Annually managed expenditure The largest component of AME was welfare spending, including pensions, social security and tax credits. AME also included debt interest payments, locally financed expenditure and other categories of spending. The OBR expects AME to decrease slightly as a share of GDP over the next five years, although welfare spending and debt interest are both expected to increase.[27] Increased welfare spending is being driven by rising pension and health-related benefits, while debt interest costs are rising due to higher government borrowing costs on the national debt, which has almost trebled in the last two decades (see section 2.4 of this briefing). The following sections consider the main categories of AME and what is expected to drive these spending categories over the next five years. Welfare Total UK welfare spending was estimated to be £334bn in 2025/26.[28] Considering welfare spending in Great Britain (welfare spending in Northern Ireland is a devolved matter), this can be broken down as follows:[29] Around £178bn (55%) of welfare spending went to pensioners, including £146bn on the state pension. Around £145bn (45%) went to those of working age and for child welfare, including spending on universal credit and its predecessors and non-Department for Work and Pensions welfare spending. Of this, around £77bn went to support for disabled people and people with health conditions, and £37bn was spent on housing benefits. Welfare spending is forecast to rise to £409bn in 2030/31 (11.2% of GDP).[30] This would be 1.1% of GDP higher than its pre-pandemic 2019/20 level. The OBR highlighted the “sharp growth” of disability and health caseloads since the pandemic as a risk to future welfare spending.[31] Looking at the anticipated rises in welfare spending over the coming years, it said the main drivers were pension and health-related benefits. It noted the following:[32] Larger state pension cohorts and the triple lock uprating are forecast to increase pensioner spending over the next five years. This is partly offset by the rise in the state pension age from 66 to 67 between 2026 and 2028. Rising caseloads drive higher health-related spending. Between 2024/25 and 2030/31, incapacity caseloads are forecast to rise by 0.6mn (from 3.4mn to 4.0mn) and disability caseloads by 2.3mn (from 6.5mn to 8.8mn). More recent data indicated that welfare spending in the four months to July 2026 was £2.2bn above forecast, although the drivers of this remain uncertain.[33] The following chart shows total welfare spending and forecast (as a dashed line) as a percentage of GDP from 2013/14 to 2030/31. Figure 2. Total UK welfare spending as a percentage of GDP, 2013/14 to 2030/31 (outturn and forecast) (Department for Work and Pensions, ‘Benefit expenditure and caseload tables 2026’, 14 April 2026. See: ‘Outturn and forecast tables: Spring forecast 2026’, accessed 27 August 2026, ‘UK welfare’.) Debt interest The cost of debt interest payments has risen substantially in recent years and is now around twice as high as in the 10 years preceding the pandemic, when it averaged 2% of GDP.[34] Interest payments on the national debt cost £109bn (3.6% of GDP) in 2025/26.[35] This included the interest government pays to private sector holders of the bonds it issues—known as ‘gilts’—and also the net interest paid by the Bank of England’s ‘asset purchase facility’ on the money created during quantitative easing since the late 2000s.[36] Debt interest spending is forecast to rise further to £137bn (3.8% of GDP) in 2030/31. [37] The IFS has argued that debt interest payments remain “worryingly high”, noting that in the four months to July 2026 they are £1.0bn above the OBR’s March forecast and could exceed the overall forecast this year if inflation and interest rates “stay elevated”.[38] As of 3 September 2026, bond yields have reached their highest level since at least the 2008 financial crisis, which could push up debt interest costs further.[39] The following chart shows historic government debt interest and its forecast (as a dashed line) as a percentage of GDP from 2005/06 to 2030/31. Figure 3. Total central government net debt interest as a percentage of GDP, 2005/06 to 2030/31 (outturn and forecast) (Office for Budget Responsibility, ‘Data’, accessed 3 September 2026. See: ‘Public finances databank—August 2026’, 27 August 2026, ‘Aggregates (per cent of GDP)’.) Other annually managed expenditure Other AME includes locally financed expenditure, expenditure by public corporations, public sector depreciation, financial sector interventions, student loans, and other spending categories. For a full breakdown of these spending types, see: HM Treasury, ‘Public spending statistics release: July 2026’ (updated 29 July 2026). This type of spending is expected to fall as a percentage of GDP between 2025/26 and 2030/31.[40] While locally financed expenditure and expenditure by public corporations are expected to remain approximately level as a proportion of GDP (between 2.8–3.0% and 0.4–0.5% respectively), ‘other AME’ is expected to decrease from 2.6% of GDP in 2025/26 to 1.8% of GDP in 2030/31. 2.3 Taxes and other government revenue The total ‘tax take’ in 2025/26 was at its highest level since the early 1950s as a percentage of GDP and is forecast to increase to a historic high over the next five years. The main drivers of the expected tax take increase are the freeze to personal income tax and national insurance contributions (NICs) thresholds as earnings rise (known as ‘fiscal drag’), and changes introduced by the Starmer government to increase employer NICs, remove certain inheritance tax reliefs and increase capital gains tax.[41] The public sector raised £1,230bn (40.1% of GDP) in 2025/26 through taxes and other sources of revenue.[42] Excluding other sources of revenue, the tax take was £1,103bn (36.0% of GDP).[43] The majority of tax revenue (65%) was raised through the top three revenue raisers—income tax (£329bn), NICs (£204bn) and VAT (£180bn).[44] The following chart shows total public sector receipts in 2025/26, broken down by revenue source. Figure 4. Total public sector net receipts in 2025/26, by revenue source (£bn) (Office for Budget Responsibility, ‘Data’, accessed 3 September 2026. See: ‘Public finances databank—August 2026’, 27 August 2026, ‘Receipts (£bn)’; and Office for National Statistics, ‘Public sector current receipts: Appendix D’, 21 August 2026. See: ‘Current edition of this dataset’, ‘Time series’.) Total public sector revenue is expected to increase to 42.7% of GDP in 2030/31.[45] This includes a projected tax take of 38.5% of GDP, a historic high and a 5.6 percentage point increase on the pre-pandemic level of 32.9% of GDP in 2019/20.[46] The most recent data showed that in the four months to July 2026, tax receipts were £2.8bn above the OBR’s March forecast, driven by higher than expected corporation tax, income tax and NICs receipts.[47] The following chart shows historic public spending and revenue (which consists mostly of taxes) and their forecasts (as dashed lines) as a percentage of GDP from 2005/06 to 2030/31. Figure 5. Total managed expenditure and public sector current receipts as a percentage of GDP, 2005/06 to 2030/31 (outturn and forecast) (Office for Budget Responsibility, ‘Data’, accessed 3 September 2026. See: ‘Public finances databank—August 2026’, 27 August 2026, ‘Aggregates (per cent of GDP)’.) 2.4 Government borrowing and public debt The difference between government spending and receipts (‘the deficit’) is financed by borrowing, usually in the form of UK government gilts issued to investors in the bond market. The deficit has fallen since the historic high reached during the coronavirus pandemic, but the OBR states that the deficit has remained at “elevated levels” since.[48] It described the UK’s deficit as “persistently higher than the advanced-economy average”.[49] In 2025/26, the government’s deficit was £130bn (4.2% of GDP) and it is forecast to fall to 1.6% of GDP in 2030/31.[50] However, borrowing figures for the four months to July 2026 showed that the government borrowed £2.3bn more than forecast by the OBR in March. Higher receipts (£2.8bn higher than the OBR’s March forecast) were more than offset by higher public spending (£5.1bn higher than the OBR’s March forecast).[51] If borrowing figures continue to exceed the OBR’s forecast, this could result in the OBR revising its future borrowing forecasts upwards, posing a challenge to the government’s attempts to meet its fiscal rules (see section 3.1 of this briefing). The following chart shows historic government borrowing and its forecast (as a dashed line) as a percentage of GDP from 2005/06 to 2030/31. Figure 6. Public sector net borrowing as a percentage of GDP, 2005/06 to 2030/31 (outturn and forecast) (Office for Budget Responsibility, ‘Data’, accessed 3 September 2026. See: ‘Public finances databank—August 2026’, 27 August 2026, ‘Aggregates (per cent of GDP)’.) As of July 2026, the national debt stood at £2,985bn (94.1% of GDP).[52] This is nearly triple the level of two decades ago as a percentage of GDP and is almost double the advanced economy average.[53] The OBR said it expected public debt to be “broadly stable” over the next five years and settle at around 95% of GDP in the early 2030s.[54] The following chart shows historic government debt and its forecast (as a dashed line) as a percentage of GDP from 2005/06 to 2030/31. Figure 7. Public sector net debt as a percentage of GDP, 2005/06 to 2030/31 (outturn and forecast) (Office for Budget Responsibility, ‘Data’, accessed 3 September 2026. See: ‘Public finances databank—August 2026’, 27 August 2026, ‘Aggregates (per cent of GDP)’.) 2.5 Long-term outlook The OBR has also produced forecasts of the UK’s long-term economic and fiscal outlook up to 50 years into the future. Its most recent long-term projections, published in March 2026, forecast that the fiscal challenges driven mainly by an ageing population would push the national debt above 275% of GDP by 2074, compared to 94.1% now.[55] These projections were based on the policies in place in March 2026, prior to Andy Burnham becoming prime minister. However, the OBR said that significant economic shocks could mean this figure could rise higher: In a scenario in which, in addition to demographic pressures, the economy is hit by a significant shock every nine years, debt could rise to reach around 325 percent of GDP by the 2070s. This underscores the experience of the past two decades where it is unanticipated shocks that have had the most serious and lasting negative effects on the outlook for the economy and public finances.[56] The following chart produced by the OBR shows the long-term projections for public sector net debt as a percentage of GDP under a “baseline” scenario and a scenario in which the UK economy experiences periodic shocks. Figure 8. OBR long term projection of public sector net debt as a percentage of GDP (Office for Budget Responsibility, ‘Economic and fiscal outlook’, March 2026, p 105.) 3. Government fiscal policy 3.1 Current fiscal rules Fiscal rules have been adopted by governments since 1997 and this has been a requirement since the Budget Responsibility and National Audit Act 2011.[57] In addition, the Budget Responsibility Act 2024 requires that any “fiscally significant” announcements made by the government be assessed by the OBR. The government’s fiscal rules are set out in a ‘charter for budget responsibility’ published by the Treasury.[58] The Treasury’s current “mandate for fiscal policy” in the autumn 2025 charter states that the budget for day-to-day spending must be forecast to be in surplus in 2029/30.[59] This mandate is supplemented by two further targets:[60] Debt, defined as public sector net financial liabilities (PSNFL), must be falling as a share of the economy by 2029/30. Welfare spending must be contained within a predetermined cap and margin set by the Treasury.[61] 3.1.1 Changes made by the Starmer government In 2024, the then chancellor, Rachel Reeves, changed the fiscal rules adopted by the preceding Conservative government. This included a change in the definition of debt from public sector net debt (PSND) excluding the Bank of England to public sector net financial liabilities (PSNFL).[62] PSND only considers the government’s liquid financial assets and debt, but PSNFL includes the assets and liabilities of funded public sector pension schemes, illiquid assets such as loans (including student loans) and other financial liabilities.[63] In September 2024, the IFS estimated that changing from the PSND to PSNFL definition of debt “would allow much more space for borrowing for investment (perhaps as much as £50bn more)”.[64] Ms Reeves also changed the deficit target adopted by the previous Conservative government. The previous rule required that forecast public sector net borrowing did not exceed 3% of GDP in the fifth year of the forecast period. The new rule states that the current budget (covering day-to-day spending) should be forecast to be in surplus (or a deficit of no more than 0.5% of GDP) in 2029/30. In November 2024, the Institute for Government said this change would “enable governments to continue to spend on investment”.[65] In the November 2025 budget the Starmer government said it would legislate so that the OBR only assesses performance against fiscal rules once a year at budgets, while the OBR would continue to publish a second annual five-year forecast each spring.[66] Therefore, although the OBR published its most recent economic and fiscal outlook at the spring statement in March 2026, the most recent OBR assessment of the government’s position against the fiscal rules was at the November 2025 budget. In November 2025, the OBR forecast that the government would meet its current budget rule by a margin of £22bn in 2029/30 (0.6% of GDP). The margin is sometimes referred to as ‘fiscal headroom’. However, estimates from Bloomberg suggest that recent rises in the government’s borrowing costs may have halved this headroom.[67] The Resolution Foundation think tank also recently estimated that headroom against the chancellor’s fiscal rules may have shrunk to £8bn as a result of the economic impact of the Iran conflict and rises in the cost of government borrowing.[68] 3.1.2 Burnham government approach In May 2026, during his campaign for the leadership of the Labour Party, Andy Burnham committed to the previous Labour government’s fiscal rules. He confirmed this in his first speech as prime minister on 20 July 2026.[69] The government has also confirmed that it will set out its fiscal plans in a budget statement to be delivered on 28 October 2026.[70] Chancellor John Healey said it would be a budget “that moves money and power out of Westminster, and into every postcode around Britain”.[71] He added that it would be “built on fiscal discipline” and would “meet our fiscal rules”.[72] There has been some media speculation that the government may be planning to borrow more money without breaching its fiscal rules because of its change in the definition of debt from PSND to PSNFL.[73] Because the definition of PSNFL allows the government to “net off […] assets held by the public sector on which it might expect a return”, the government may still be able to meet its debt rule by offsetting the value of new infrastructure projects against a higher level of borrowing.[74] Prior to her appointment as chancellor of the Duchy of Lancaster, Louise Haigh argued in an article in May 2026 that the national wealth fund (NWF) should be allowed to “borrow against their existing balance sheet outside of the fiscal rules”.[75] The Resolution Foundation said the changes introduced by Rachel Reeves could allow the government to use the NWF to make “an additional £9bn annual investment by 2031 in real terms”.[76] 3.2 Public spending The Burnham government has made statements in recent weeks that could imply future public spending commitments. These include: Adult social care reform: The government announced it intends to take further action to reform adult social care and deliver a national care service.[77] The Independent Commission on Adult Social Care, led by Baroness Casey of Blackstock (Crossbench) and established in 2025, will now be asked to report by summer 2027.[78] Analysis by the Health Foundation has estimated that if the government were to cover the costs of all those currently receiving adult social care services in England this would imply an additional £18.5bn of annual spending by 2035/36.[79] Large scale council house building: On 29 June 2026, Andy Burnham said the government would “oversee the biggest council house building programme since the post-war period”.[80] On 25 August 2026, the government announced “nearly £10bn of allocations” to “support the delivery of more than 70,000 homes across England” including “quality council, social and affordable homes”.[81] However, the government said this funding would come from the £39bn social and affordable homes programme announced at the 2025 spending review. Defence commitments: In his first speech as prime minister on 20 July 2026, Andy Burnham said the government would “honour our commitments on defence to our international partners”.[82] The chancellor, John Healey, had previously resigned as defence secretary in the Starmer government on 11 June 2026 arguing that the financial settlement in the government’s defence investment plan fell “well short of what is required for defence and the country at this dangerous time”.[83] The IFS has estimated that the government’s existing commitment to spend 3.5% of GDP on defence by 2035 would cost an additional £25bn annually in real terms relative to current plans.[84] On welfare spending, the new prime minister pledged in his July 2026 speech to provide a “fair and sustainable way to bring the welfare bill down”.[85] He said this would include helping more young people into work by “changing the education system and giving them more support” and by building more council homes. The Burnham government has also made a number of smaller announcements relating to public spending, including a pledge to end rough sleeping backed by £442mn of funding and a £2 bus fare cap in England (outside London) backed by £400mn of funding.[86] The prime minister said funding for these commitments had been allocated by “changing some of our priorities” and finding money within existing budgets by “reprioritising existing programmes”.[87] 3.3 Taxes Andy Burnham has stated that he would honour the Labour Party manifesto, which pledged not to increase “national insurance, the basic, higher, or additional rates of income tax, or VAT”.[88] These three taxes raised a total of 65% of tax revenue in 2025/26.[89] However, there have also been media reports that the prime minster has refused to rule out tax rises, saying he wouldn’t be “unrealistic” about the “challenging” state of public finances.[90] The Burnham government has also made other tax announcements, including: Providing local control over tax revenue: The government has agreed to change the way regional government is funded, starting by replacing grants from central government with a share of local income tax for every mayor beginning in 2028.[91] VAT cut on household electricity bills: The government has announced the removal of VAT from domestic electricity bills from 1 October 2026.[92] The Treasury estimated that this tax cut would cost £850mn in 2026/27, which would be funded through the cancellation of the digital ID programme.[93] However, Darren Jones, the former chief secretary to former prime minister Sir Keir Starmer, has suggested the digital identity programme was itself unfunded.[94] Business rates support for pubs, clubs and live music venues: The government has announced a 20% cut in business rates for pubs, social clubs and live music venues in England from April 2027, on top of the 15% relief already in place.[95] The government said this would cost £100mn a year, paid for by reviewing business rates reliefs for “anti-social businesses” and by changing the way VAT is collected on sales via online marketplaces.[96] 4. Commentary 4.1 Opposition parties During his time as Conservative shadow chancellor, Sir Mel Stride criticised former chancellor Rachel Reeves for her fiscal plans. He said the plans would mean borrowing “one quarter of a trillion pounds more than the plans that she inherited” over the course of the current parliament.[97] He also criticised the former chancellor’s decision to change the definition of debt used in the government’s fiscal rules (see section 3.1.1 of this briefing). He said this “allowed her to take her foot off the brake and borrow and spend even more”.[98] Citing speculation that Andy Burnham was considering increasing borrowing, Sir Mel Stride described this as “utterly reckless” and said “the bond markets will not wear it”. [99] Sir Mel Stride said the Conservative party had identified £47bn worth of savings, including £23bn from welfare budget.[100] He said this could be used to cut the deficit and lower taxes. For example, he said a Conservative government would abolish stamp duty. The Liberal Democrats’ Treasury spokesperson and deputy leader, Daisy Cooper, argued for the break up of the Treasury. She described the Treasury as “anti-growth” because it “enables governments to go for short-term tax grabs that suit political cycles over the need for long-term growth”.[101] She said the Treasury should be replaced with “a new powerful department for growth”, with a mandate to “boost long-term prosperity, improve living standards and end the cost of living crisis”.[102] The leader of Reform UK, Nigel Farage, said Andy Burnham’s plans would fail to tackle the national debt.[103] Mr Farage has previously indicated a desire to cut taxes but stated that the “dire state of debt and our finances” meant that “substantial tax cuts […] are not realistic at this current moment in time”.[104] Reform UK has pledged welfare reforms that it said would “save the taxpayer £50bn a year”, arguing for a welfare system based on “common sense principles” that should be “reserved for British citizens”.[105] The Green Party has called for rent controls, public ownership of water companies and wealth taxes “as a first step towards tackling gross inequality and getting serious investment into our economy and public services”.[106] 4.2 Other commentary The IFS has said the government faces “tight fiscal constraints and a series of difficult decisions”.[107] It stated: The public finances remain under pressure, debt interest spending is high, and commitments not to raise the main rates of income tax, national insurance or VAT limit some of the most obvious ways of raising revenue. At the same time, the new prime minister will need to make choices about departmental spending, defence, welfare, social care and the cost of living.[108] The director of the IFS, Helen Miller, described Andy Burnham’s intention to retain the existing fiscal rules as “sensible”.[109] She explained her view: Loosening the rules in order to borrow significantly more would mean debt continuing to rise and would undermine the UK’s fiscal credibility. It would require investors to be compensated with even higher interest rates. […] Under current plans, total public spending will continue to grow over this parliament. Taxes are due to rise by even more, allowing borrowing to fall and debt to stabilise. Despite a growing state, spending on public services will remain tight.[110] The Institute for Public Policy Research (IPPR) said the UK was not on a “fiscally sustainable track” because of government failure to tackle long-term pressures and “short-sighted fiscal rules”.[111] It forecast that one fifth of all government revenue would go towards paying debt interest by 2074.[112] It called for a “new fiscal settlement” that shifted towards taxing “property, older people and wealth” and away from “young people and work”.[113] The chief executive of the Resolution Foundation, Ruth Curtice, said the UK was in a “fiscal hole”. She recommended that the new chancellor take three steps to address this:[114] balance the books by restraining spending and more fairly taxing income from sources other than employment tackle long-run tax and spending issues, including avoiding policies that grow spending faster than the economy (such as the triple lock on pensions) boost investment, including an immediate doubling of the national wealth fund The Centre for Policy Studies argued for a fundamental reconsideration of the role and reach of the state.[115] It said government spending was on course to grow by 23% from 2019/20 to 2028/29, “more than double the projected rate of economic growth (11%) over the same period”.[116] It argued for “radical, pro-growth reforms” to avoid the UK state “becoming a combination of health service, benefit office and debt collection agency—with all other functions squeezed to compensate”.[117] 5. Read more House of Commons Library, ‘Public finances: Economic indicators’, 21 August 2026; What is happening to business rates on pubs?’, 24 August 2026; ‘Could Andy Burnham let mayors raise more taxes?’, 31 July 2026; and ‘Tax statistics: An overview’, 10 June 2026 House of Lords Library, ‘Debating public debt: Perspectives compared’, 27 July 2026; and ‘Welfare reforms and youth unemployment’, 5 June 2026 Image by Stephen Richards on Wikimedia Commons. Share this Share this with FacebookShare this with Facebook TwitterShare this with Twitter LinkedInShare this with LinkedIn EmailShare this with Email Close share panel × References Office for Budget Responsibility, ‘Economic and fiscal outlook’, March 2026. Return to text As above, p 6. Return to text As above. Return to text As above, p 5. Return to text As above. Return to text International Monetary Fund, ‘IMF country report: United Kingdom’, July 2026, p 1. Return to text As above, p 2. Return to text As above, p 1. Return to text Organisation for Economic Cooperation and Development, ‘OECD economic outlook’, June 2026. Return to text As above, p 287. Return to text As above. Return to text As above, p 289. Return to text As above, p 290. Return to text As above, p 287. Return to text Office for Budget Responsibility, ‘Data’, accessed 3 September 2026. See: ‘Public finances databank—August 2026’, 27 August 2026, ‘Aggregates (£bn)’ and ‘Aggregates (per cent of GDP)’. Return to text As above. Return to text HM Treasury, ‘Public spending statistics release: July 2026’, updated 29 July 2026. See: ‘Departmental budgets’, accessed 3 September 2026, ‘Table_1_1’. Return to text House of Commons Library, ‘Main estimates: Government spending plans for 2026/27’, 12 May 2026, p 9. Return to text As above, p 20. Return to text Office for Budget Responsibility, ‘Economic and fiscal outlook’, March 2026, pp 64–5. Return to text HM Treasury, ‘Public spending statistics release: July 2026’, updated 29 July 2026. See: ‘Departmental budgets’, accessed 27 August 2026, ‘Table_1_1’ and ‘Table_1_3’. Return to text As above, ‘Table_1_3’. Return to text Institute for Fiscal Studies, ‘Actions speak louder than words’, 20 July 2026. Return to text As above, ‘Table_1_6’. Return to text Institute for Fiscal Studies, ‘Public investment: What you need to know’, 25 April 2024. Return to text Office for Budget Responsibility, ‘Economic and fiscal outlook’, March 2026, p 58. Return to text As above. Return to text Department for Work and Pensions, ‘Benefit expenditure and caseload tables 2026’, 14 April 2026. See: ‘Outturn and forecast tables: Spring forecast 2026’, accessed 27 August 2026, ‘UK welfare’. Return to text Department for Work and Pensions, ‘Guidance and methodology: Benefit expenditure and caseload tables’, updated 14 April 2026. Return to text Department for Work and Pensions, ‘Benefit expenditure and caseload tables 2026’, 14 April 2026. See: ‘Outturn and forecast tables: Spring forecast 2026’, accessed 27 August 2026, ‘UK welfare’. Return to text Office for Budget Responsibility, ‘Economic and fiscal outlook’, March 2026, p 14. Return to text As above, p 70. Return to text Office for Budget Responsibility, ‘Commentary on the public sector finances: July 2026’, 21 August 2026, p 3. Return to text Office for Budget Responsibility, ‘Economic and fiscal outlook’, March 2026, p 72. Return to text Office for Budget Responsibility, ‘Data’, accessed 3 September 2026. See: ‘Public finances databank—August 2026’, 27 August 2026, ‘Aggregates (£bn)’ and ‘Aggregates (per cent of GDP)’. Return to text Quantitative easing is the process by which the Bank of England digitally created £895bn of new reserves to buy bonds (mostly UK gilts) in an attempt to lower interest rates. This process started in March 2009. For further information, see: Bank of England, ‘Quantitative easing’, updated 5 December 2025. Return to text Office for Budget Responsibility, ‘Data’, accessed 3 September 2026. See: ‘Public finances databank—August 2026’, 27 August 2026, ‘Aggregates (£bn)’ and ‘Aggregates (per cent of GDP)’. Return to text Institute for Fiscal Studies, ‘First quarter borrowing figures reflect higher inflation and highlight fiscal challenges for the incoming chancellor’, 21 July 2026; and Office for Budget Responsibility, ‘Commentary on the public sector finances: July 2026’, 21 August 2026, p 3. Return to text Financial Times (£), ‘Bonds: UK 10 year gilt’, accessed 3 September 2026. Return to text Office for Budget Responsibility, ‘Economic and fiscal outlook’, March 2026, p 58. Return to text As above, p 41. Return to text Office for Budget Responsibility, ‘Data’, accessed 3 September 2026. See: ‘Public finances databank—August 2026’, 27 August 2026, ‘Aggregates (£bn)’ and ‘Aggregates (per cent of GDP)’. Return to text As above. Return to text Office for Budget Responsibility, ‘Data’, accessed 3 September 2026. See: ‘Public finances databank—August 2026’, 27 August 2026, ‘Receipts (£bn)’; and Office for National Statistics, ‘Public sector current receipts: Appendix D’, 21 August 2026. See: ‘Current edition of this dataset’, ‘Time series’. Return to text Office for Budget Responsibility, ‘Data’, accessed 3 September 2026. See: ‘Public finances databank—August 2026’, 27 August 2026, ‘Aggregates (£bn)’ and ‘Aggregates (per cent of GDP)’. Return to text As above. Return to text Office for Budget Responsibility, ‘Commentary on the public sector finances: July 2026’, 21 August 2026, p 1. Return to text Office for Budget Responsibility, ‘Economic and fiscal outlook’, March 2026, p 5. Return to text As above. Return to text Office for Budget Responsibility, ‘Data’, accessed 3 September 2026. See: ‘Public finances databank—August 2026’, 27 August 2026, ‘Aggregates (£bn)’ and ‘Aggregates (per cent of GDP)’. Return to text Office for Budget Responsibility, ‘Commentary on the public sector finances: July 2026’, 21 August 2026, p 1. Return to text Office for National Statistics, ‘Public sector finances, UK: July 2026’, 21 August 2026. Return to text Office for Budget Responsibility, ‘Economic and fiscal outlook’, March 2026, p 5. Return to text As above. Return to text As above, p 104; and Office for National Statistics, ‘Public sector finances, UK: July 2026’, 21 August 2026. Return to text Office for Budget Responsibility, ‘Economic and fiscal outlook’, March 2026, p 7. Return to text Institute for Government, ‘Fiscal rules in the UK since 1997’, updated 4 December 2025. Return to text HM Treasury, ‘Charter for budget responsibility autumn 2025’, updated 23 February 2026. Return to text As above, p 4. Return to text As above. Return to text Around half of welfare spending is excluded from this cap. For further information, see: House of Commons Library, ‘The welfare cap’, 24 January 2025. Return to text Institute for Government, ‘Current UK fiscal rules’, updated 19 November 2024. Return to text House of Commons Library, ‘The UK’s fiscal targets’, 23 June 2026, pp 5 and 13–15. Return to text Institute for Fiscal Studies, ‘Fiscal rules and investment in the upcoming budget’, 27 September 2024. Return to text Institute for Government, ‘Current UK fiscal rules’, updated 19 November 2024. Return to text HM Treasury, ‘Budget 2025’, 26 November 2025, HC 1492 of session 2024–26, p 17. Return to text Bloomberg UK (£), ‘Surge in UK borrowing costs halves government’s fiscal headroom’, 1 September 2026. Return to text Resolution Foundation, ‘Stronger growth fails to deliver public finances windfall’, 21 August 2026. Return to text Prime Minister’s Office, ‘Andy Burnham’s first speech as prime minister: 20 July 2026’, 20 July 2026. Return to text HM Treasury, ‘Budget to move “power and money out of Westminster, and into every postcode around Britain”’, 31 July 2026. Return to text As above. Return to text As above. Return to text Times (£), ‘Treasury seeks to kick-start economy with £9bn-a-year borrowing bonanza’, 4 August 2026. Return to text Office for National Statistics, ‘Public sector net financial liabilities (PSNFL)’, 30 October 2024. Return to text Renewal, ‘A new fiscal framework to renew Britain’, 12 May 2026. Return to text Times (£), ‘Treasury seeks to kick-start economy with £9bn-a-year borrowing bonanza’, 4 August 2026. Return to text Department of Health and Social Care, ‘The prime minister’s commitment to adult social care,’ 6 August 2026. Return to text For more information on the commission, see: Casey Commission: Independent Commission on Adult Social Care, ‘Welcome to the Casey Commission website’, accessed 27 August 2026. Return to text Health Foundation, ‘Social care funding: Options for reform’, 24 July 2026. Return to text Andy Burnham, ‘Andy Burnham speech at the People’s History Museum, Manchester—29 June 2026’, 29 June 2026. Return to text Ministry of Housing, Communities and Local Government, ‘Historic council housebuilding comeback to help families into secure homes’, 24 August 2026. Return to text Prime Minister’s Office, ‘Andy Burnham’s first speech as prime minister: 20 July 2026’, 20 July 2026. Return to text John Healey, ‘Letter from John Healey MP to the prime minister’, 11 June 2026. Return to text Institute for Fiscal Studies, ‘Initial response to the defence investment plan’, 30 June 2026. Return to text Prime Minister’s Office, ‘Andy Burnham’s first speech as prime minister: 20 July 2026’, 20 July 2026. Return to text Prime Minister’s Office and Ministry of Housing, Communities and Local Government, ‘Prime Minister launches national drive to get everyone in for Christmas’, updated 19 August 2026; and House of Lords, ‘Written statement: Bus fares (HLWS300)’, 22 July 2026. Return to text LBC, ‘Burnham pledges to “honour his manifesto” and not raise taxes in first budget’, 24 August 2026. Return to text As above; and Labour Party, ‘Labour Party manifesto’, June 2024, p 21. Return to text Office for Budget Responsibility, ‘Data’, accessed 3 September 2026. See: ‘Public finances databank—August 2026’, 27 August 2026, ‘Aggregates (per cent of GDP)’. Return to text BBC News, ‘Burnham refuses to rule out tax rises in autumn budget’, 25 August 2026. Return to text Cabinet Office, ‘Rewiring the state: Cabinet statement’, 31 July 2026. Return to text Prime Minister’s Office et al, ‘New PM cuts tax on household electricity bills to give breathing space on cost of living’, 21 July 2026. Return to text As above. Return to text Chris Mason ‘Starmer ally takes swipe at Burnham’s first big policy’, BBC News, 21 July 2026. Return to text Prime Minister’s Office et al, ‘Burnham means business: PM slashes business rates bills for pubs, clubs and live music venues’, 23 July 2026. Return to text As above. Return to text HC Hansard, 23 June 2026, col 178. Return to text HC Hansard, 18 May 2026, col 277. Return to text HC Hansard, 23 June 2026, col 178. Return to text HC Hansard, 18 May 2026, cols 279–80. Return to text Liberal Democrats, ‘Get Britain growing again’, 11 February 2026. Return to text As above. Return to text GB News, ‘Nigel Farage delivers blunt verdict on Andy Burnham's 10-year plan’, updated 2 July 2026. Return to text Chartered Institute of Taxation, ‘Reform UK: Party drops radical tax cut commitment’, 7 November 2025. Return to text Reform UK, ‘Making welfare work’, August 2026, pp 4 and 5. Return to text Green Party, ‘“Is he willing to take on vested interests?”: From Westminster to greater Manchester, Greens challenge Burnham in first week as PM’, 24 July 2026. Return to text Institute for Fiscal Studies, ‘The tax and spending choices facing Andy Burnham’, 16 July 2026. Return to text As above. Return to text Institute for Fiscal Studies, ‘Actions speak louder than words’, 20 July 2026. Return to text As above. Return to text Institute for Public Policy Research, ‘Revealed: £1 in every £5 of future generations’ taxes set to go on debt interest’, 13 August 2026. Return to text As above. Return to text Institute for Public Policy Research, ‘Nearly four-fifths of Britain’s rising fiscal costs will come from ageing by 2075, finds IPPR’, 26 August 2026. Return to text Resolution Foundation, ‘The three steps needed to climb out of the UK’s fiscal hole’, 16 July 2026. Return to text Centre for Policy Studies, ‘The cost of the British state’, June 2026. Return to text As above. Return to text As above. Return to text Quick Links Upcoming business 200 Years of the House of Lords Library About us History of the Library Disclaimer Feedback By Topic Brexit and the EU The Constitution Coronavirus Economy and business Health and social policy Home affairs The House of Lords Science and the environment World affairs Topics list A-Z By Type Collections Research Briefing In Focus Data dashboard All research Mailing List Subscribe to receive email alerts every time we publish new research about the topics you’re interested in. Subscribe © House of Lords 2026. Re-use our content freely and flexibly with only a few conditions under the Open Parliament Licence. Privacy notice | Cookie policy | Cookie settings | Accessibility statement