Burnham’s big budget test

Since his succession in the Summer, Burnham has found life in Number 10 relatively straightforward. A flurry of initial policy announcements and a rousing conference speech praised beyond the Labour benches have left the party an average of 6 points ahead across all pollsters. But the Prime Minister, the Chancellor and the rest of the government’s big challenge so far comes on Wednesday 28th October, delivering their first budget. Can they marry their impressive communications with the fiscal policies to deliver their priorities? Which taxes will they hike? And what does this all mean for transport and infrastructure?

Fiscal constraints

Despite the shift in mood in the Labour Party, and in large parts of the country, the macroeconomic picture hasn’t changed much. The UK’s debt just recently surpassed £3 trillion for the first time, and the Treasury ran a budget deficit of £24.5 billion in September, higher than expected. Inflation rose to 3.5%, the highest in a year, and vacancies have just reached a five-year low, although unemployment has reached its lowest levels in a year. The Iran and Ukrainian wars continue, with no concrete end goal in sight, applying consistent pressure on energy prices and household bills. All this is to say that the Chancellor is going to have to make some tough decisions, almost certainly including tax cuts, particularly in light of already committed policies such as the Defence Investment Plan (DIP).

The implications for transport are not yet clear. In the DIP, the DfT was asked to contribute £800 million, primarily funded via cuts to the Road Investment Strategy 3. The A38 Derby Junctions and the A46 Newark Bypass are two projects identified as potential candidates for cancellation. This would suggest that further cuts caused by budget commitments are likely to affect road funding rather than other sustainable projects. Furthermore, in the same funding explainer for the DIP, it stated that Local Authority funding for potholes, investment in Northern Powerhouse Rail and bus and rail services would not be affected by cuts. Again, this is merely an indicator, but it suggests that transport savings required due to budget announcements might be focused on major road projects as opposed to sustainable modes or road maintenance.

Fuel duty

As with almost every budget in recent memory, we’ve speculation surrounding fuel duty. The government was set to reverse the 5p cut in fuel duty, introduced in 2022, by 3p initially, rising from 52.95p-per-litre to 55.95p-per-litre, excluding VAT. A further 2p increase would take effect in March. After calls from industry bodies such as IAM RoadSmart, some papers are suggesting the Chancellor may postpone this increase. The final fuel duty rates will most likely be confirmed on the 28th, so we will have to wait and see whether the government will crack down on motorists or continue its relief.

£2 bus fare cap

During Burnham’s initial policy blitz, he announced that single bus tickets outside of London will be capped at £2, replacing the existing £3 cap. This was confirmed by Lord Hendy in Parliament the following day. However, since then we haven’t heard much in the way of funding details, outside of cuts to the Department of Energy Security and Net Zero’s budget. Given previous government’s propensity to reannounce DfT policies at the budget, we may see this reconfirmed, with more detail on funding and possibly further announcements to support the government's commitment to “lay the foundations for stronger bus networks across the country.”

Devolution

How the Chancellor advances the devolution agenda by giving regional authorities greater financial autonomy and the power to make more decisions locally will likely be a focus of Healy’s speech. The transport industry has long asked for more long-term certainty regarding local authorities' transport funding. A move towards multi-year local transport settlements would help achieve this, but it is unlikely in the budget due to other competing priorities. What we are more likely to see, and what will have implications for transport, are any further announcements, such as the plans for Mayoral Strategic Authorities to retain a share of National Income Tax, which will put more money into the pockets of regional and local authorities.

From optimism to hard choices

The Autumn budget is undoubtedly the biggest test for the government so far. The extent to which the Chancellor can reconcile the optimism generated by largely part-funded policy announcements with the fiscal and macroeconomic realities he faces will ultimately determine how the Budget is judged. What impact the tightening of fiscal policies will have on road and public transport funding will be of great significance for the transport industry. As will further clarity around fuel duty and the £2 bus fare. And how will the government continue to reallocate funds from Westminster into the regions? All eyes will be on John Healey on the 28th October for the new government's toughest challenge yet.