On Monday, Andy Burnham said he wanted Britain to rejoin the European Union in his lifetime. On Wednesday, his Chancellor delivered a Budget that made use of economic powers Britain now exercises outside the European Union, even as the Prime Minister reopened the argument about returning to it.
John Healey suspended import duties on more than 100 food and drink lines. The Treasury set out £20.4bn of additional capital for the National Wealth Fund and the British Business Bank, £15.4bn and £5bn respectively over roughly half a decade. The Chancellor’s growth package is built around buying British, and he challenged Kemi Badenoch from the despatch box to back “our support for British families and British firms”.
The government will not say plainly what it is doing. That reticence is the most revealing thing about this Budget.
The Treasury’s Budget 2026 offers a £100 energy payment from January 2027 to households in England in council tax bands A to D, up to 20 million of them, with equivalent funding for the devolved governments through the Barnett formula. It extends the VAT reduction on electricity to July 2027 and holds the fuel duty freeze to the same date. It raises the minimum wage and promises support for small businesses, housing and defence. These are tangible measures, and Great British PAC does not dispute that families facing higher bills need relief. The question is what the Government is asking them to pay in return. Taxes on savings and property income are going up, the OBR forecasts an average of £14bn a year in additional debt interest compared with its spring forecast, and the detailed route to 3 per cent of GDP on defence will not be published until the next spending review. Ministers call it breathing space. Great British PAC sees a Budget offering immediate relief while leaving the difficult questions about taxation, growth, national security and long-term affordability unanswered.
Three powers, and the limits of each
The three levers are not equivalent, and ministers should stop treating them as though they were.
Tariff-setting is the clearest case. It is a competence Britain recovered in full. Commercial policy was an exclusive competence of the European Union, which is why no member state could unilaterally suspend a duty covered by the common commercial policy, any more than it could sign its own trade agreement. Since January 2021 the UK has run its own tariff schedule, its own suspensions and its own quotas, administered through the government’s duty suspension regime. What the Chancellor did on Wednesday with gherkins and garlic was not available to him inside the union.
State-backed investment is a different story and the distinction matters. Public capital for lenders of this kind was not prohibited by EU membership. It was possible under the state aid framework, subject to block exemptions, conditions and, for larger and more novel schemes, notification and approval. The British Business Bank’s own record includes the European Commission clearing its creation under state aid rules in 2014. The bank existed, lent and grew throughout the years of membership.
What changed after Brexit was the legal framework, not the existence of the power. Subsidy decisions are now taken domestically under the Subsidy Control Act 2022. That is a genuine change of architecture, and a faster and more politically responsive one. It is not an unlimited exemption from international obligations. The EU-UK Trade and Cooperation Agreement contains level playing field commitments on subsidies, and the UK remains bound by them, as the Commission’s own summary of the agreement sets out. The £20.4bn is a decision about scale and speed, and one that has been announced rather than deployed, not a permission that was withheld.
Procurement is more bounded still. EU membership did not prevent governments from supporting domestic industry, but it did constrain how far they could go: the directives required equal treatment and non-discrimination, and the room for favouring national suppliers was narrow. The UK now sets its own rules under the Procurement Act 2023, with a national procurement policy statement and far more discretion over award criteria. That is real additional flexibility, and it is why Rachel Reeves wrote to every spending minister in the spring telling them to buy British wherever possible, as the BBC reported in June, and why Mr Healey’s September growth speech promised to “back British businesses, buy British goods”.
The constraint has not vanished. The trade agreement still requires the UK not to discriminate against EU firms established here in the procurement it covers, a point the Commission makes without embarrassment. Defence is where the genuine room sits, because the agreement’s security provisions give ministers space that civil contracts do not. Whether the government’s new procurement tests would survive legal challenge has not been tested, and ministers have not published the advice. A serious government would say which contracts it believes it can reserve, on what legal basis, and what it expects the consequences to be. This one prefers the slogan.
The £21 saving does not survive the small print
The tariff policy is defensible as a statement of intent. It is not defensible as the centrepiece of a cost-of-living Budget.
Research published by the UK Trade Policy Observatory at Sussex before the Budget examined the product list then under consideration, which closely tracks what the Treasury has now announced. It found that around 80 per cent of the agri-food imports on that list already enter Britain duty free under existing free trade agreements or the Developing Countries Trading Scheme. It found that 87.1 per cent of the food lines are non-perishable, precisely the category where retailers hold stock bought at the old price and pass savings through most slowly. The academic evidence it cites suggests that a one percentage point tariff cut lowers consumer prices by roughly 0.08 per cent.
The government’s own costing is more modest than the headline. The Budget puts the consumer benefit from this week’s suspensions at £120m to £185m a year, and at £245m to £595m once June’s food package is added. Spread evenly across roughly 28 million households, even the top of that combined range is about 40p a week, which is where the £21-a-year figure briefed before the speech came from. It is a ceiling, not a forecast, and the same study asks the only question that matters: does the price come down? Ministers cannot mandate the answer, and on this evidence they should not promise it.
None of that makes the policy worthless. It makes it modest. What voters should notice is the distance between the announcement and the actual benefit.
A tax raid on the people the Budget says it is helping
Two days before the Budget, the Treasury let it be known that savers had been spared. Rachel Reeves’s plan to cut the cash ISA allowance from £20,000 to £12,000 was dead, and so it proved. Mr Healey left capital gains tax untouched and declined to lower the £2m threshold for the high value council tax surcharge.
Then he raised the tax on the money those savers earn.
“I am increasing the rates of tax on income from property and savings by a further two percentage points from April 2027,” the Chancellor told the Commons, confirming the measure.
The word that matters is “further”. This is the second increase announced in twelve months, with both measures scheduled to take effect on 6 April 2027. The first, set out by Ms Reeves in November 2025, was enacted in the Finance Act 2026 and lifts the rates on property and savings income to 22 per cent at the basic rate, 42 per cent at the higher rate and 47 per cent at the additional rate, as the National Residential Landlords Association recorded at the time. The second, announced on Wednesday, adds two more points from the same date and will need the Finance Bill that follows this Budget. On the arithmetic reported from the Treasury, the rates reach 24 per cent, 44 per cent and 49 per cent.
No taxpayer has yet paid either increase. Both bite on the same day, so landlords and savers will absorb a four percentage point rise in a single move, with nothing collected in advance. The property rates apply in England, Wales and Northern Ireland, with Scotland and Wales to be given matching powers; the savings rates apply across the United Kingdom. The Treasury gave savers no advance warning of the second.
The Office for Budget Responsibility warned when the first increase was announced, in terms the NRLA quoted then: “This successive eroding of private landlord returns will likely reduce the supply of rental property over the longer run. This risks a steady long-term rise in rents if demand outstrips supply.”
That is a forecast, and it should be read as one. Three things follow, and they need separating.
The confirmed policy is a combined four percentage points on property and savings income from April 2027, announced in two stages, the first already enacted and the second still to be legislated, and neither collected as yet. The OBR’s judgement is that repeated reductions in landlord returns are likely to reduce supply over time and that, if demand outstrips supply, rents risk rising steadily. The industry’s estimate, that the first increase alone could add £20 to £25 a month to a typical English rent and more than £40 in London, is an estimate rather than an observation, and no one can yet point to measured rent changes caused by either measure because neither has taken effect.
What can be said with confidence is the mechanism. Landlords cannot simply pass a tax rise on. Rents are set by what tenants can pay and by local supply, and an attempt to recover the tax in full would run into the first constraint before the second. The pressure the OBR describes runs through supply: fewer properties available, more competition for each one. For the 4.7 million households in the private rented sector, that is the relevant risk, and it is being increased by a Chancellor who promised those same households breathing space.
Savers deserve a fairer hearing than they usually get. The personal savings allowance shields most basic-rate taxpayers with modest deposits, and cancelling the ISA cut was a genuine reversal that will protect far more people than the surcharge will hurt. But the allowance does not cover the pensioner with a building society bond, or the saver who rearranged their affairs on the strength of a ministerial hint. Taxing savings income harder, in a Budget described as one “for the working people of Britain”, is a choice about who this government thinks should pay.
The pattern repeats elsewhere. The minimum wage rises by 3.9 per cent across every age band, which quietly shelves the 2024 manifesto pledge to “remove the discriminatory age bands” and leaves 18 to 20 year olds further behind. The £100 payment to up to 20 million households in England in bands A to D, the extension of the electricity VAT cut and the fuel duty freeze are real money and should be credited as such. So should the decision to abolish gas standing charges, though that takes effect from 2027 rather than this winter, comes with “targeted mitigations” the Treasury has not yet specified, and shifts the recovered cost onto the gas unit rate, which will leave larger and less efficient homes paying more while rural households on heating oil receive nothing at all.
Set against a four point rise on savings and rental income, these measures offer visible relief in one part of the household budget while increasing the tax burden elsewhere. That is the trade the Chancellor has made, and he has made it without saying so.
The Prime Minister’s red lines are gone
Mr Burnham became Prime Minister on 20 July, replacing Sir Keir Starmer without a general election. At Labour conference in September he said the decision to leave the EU had done more harm than good, and No 10 began gathering evidence on public support for reversing it, as the Guardian reported. This week he went further, telling Bloomberg he wants Britain back in the EU in his lifetime, and using an interview with the Sunday Times to invite an “honest discussion” about free movement.
The 2024 manifesto ruled out single market membership, a customs union and free movement of people. The Prime Minister now treats all three as open questions, subject to a mandate at the next election. He has excluded only the euro and Schengen. Kemi Badenoch said he “hasn’t thought this through”. Robert Jenrick called the idea “mad”.
A Prime Minister is entitled to change his mind, and Mr Burnham is more candid than the predecessor whose red lines he has discarded. But candour about the destination sits badly with a Budget that depends on instruments he proposes to give away.
The consequences would depend on terms no one has negotiated and no one has published. What can be said is that accession would mean adopting the relevant EU legal framework in place of the domestic one: tariff-setting returning to the common commercial policy, subsidy control to the state aid regime and procurement to the directives, subject to whatever transitionals an accession treaty secured. The Budget’s three levers would not vanish on day one, but they would cease to be Britain’s to pull.
A government that regards its own tariff schedule as temporary will use it timidly. This Budget shows exactly that: duties suspended on products that were mostly duty free already, capital allocated without any published return, and a Buy British drive trimmed to fit a treaty the government would like to replace. If the Prime Minister intends to recommend rejoining, he should say so plainly, set out the terms and ask voters to judge him on them. If he does not, he should stop allowing his office to brief otherwise. What he cannot do is run the country on Brexit’s instruments while telling the country they were a mistake.
Defence: a target date, not a plan
The Chancellor’s own record sharpens the charge. Mr Healey resigned as Sir Keir Starmer’s defence secretary in June over the refusal to commit to spending 3 per cent of GDP on defence. On Wednesday he confirmed the target.
“In this new era of threat, the demands on UK defence are rising,” he said. “Keeping the British people safe by equipping our Armed Forces is the first duty of any government.” He promised to set out at next year’s spending review how he will meet the Nato commitment of 3.5 per cent by 2035, with a target date of 3 per cent in 2030, and to fill the £5bn hole in the defence investment plan left by his predecessor. He also committed £10bn of further support for Ukraine, including £500m of urgent military funding for this winter.
The government’s position deserves stating fairly. The Budget document says the Defence Investment Plan is fully funded, through “proactive management of capital pressures and reprioritisation of capital budgets”. On the Treasury’s account, therefore, the equipment plan has been paid for rather than left short, and that is a more credible inheritance than the one Mr Healey described on taking office.
The harder question is what comes next. A funded investment plan is not the same as a funded trajectory to 3 per cent in 2030 and 3.5 per cent by 2035. That money has not been allocated, the spending review is not until 2027, and the OBR has cut its growth forecast for next year to 1 per cent, a sharp downgrade. The Institute for Fiscal Studies warned this month that the Budget would be a “work of fiction” without a credible answer to a £35bn shortfall. Reprioritising capital across Whitehall also has a cost, paid by whichever department loses the budget. The Chancellor has told the House what he intends to spend in 2030. He has not yet told it where the money comes from, and he of all ministers knows the difference.
Rough sleeping: a promise with a precedent
The Chancellor found £430m more to keep the rough sleeping offer open for the rest of this parliament, taking the total to £874m. He told the House that more than 170,000 children will sleep in temporary accommodation tonight. The money is needed and the language was sincere.
The Prime Minister’s record is the relevant test. As Mayor of Greater Manchester, Mr Burnham pledged to end rough sleeping by 2020 and did not do so. That does not prove the current pledge will fail, and it would be unfair to claim it does. It does establish that this is a promise he has made before and not met, which makes the deadline he has now set the fairest way to judge him. He says rough sleeping “isn’t a fact of life” and has promised every homeless person a bed by Christmas. That date is weeks away, the numbers will be published, and voters are entitled to check.
The Great British PAC view
Steve Wright, Leader of the Brexit Campaign of Great British PAC said:
“This Labour government has spent the last two years lamenting the decision taken in 2016, whilst simultaneously bragging about changes that they have made, not possible without Brexit. Whether it is the many cuts in VAT and on import tariffs; the addition of tax on private school fees; the renationalisation of rail providers; the completion of trade deals with India, South Korea and the GCC.”
Three of those examples rest on firm ground. Tariff-setting is a returned competence, and the India agreement is the clearest illustration of what it buys: signed in July 2025, it entered into force on 15 July 2026. The Gulf agreement was concluded in May 2026 and is not yet in force. The South Korean upgrade was concluded in December 2025 and is not yet in force either. The distinction matters: an agreement that has entered into force is not the same as one whose negotiations have concluded or whose ratification remains outstanding.
The other two deserve more care than they usually get. Adding VAT to private school fees from January 2025 required removing private schools from the education exemption that flowed from EU VAT law, and critics of the policy have argued the change would not have been open to a member state acting alone. That argument is contested rather than settled, and it should not be stated as fact. Taking passenger services back into public ownership, beginning with South Western Railway in May 2025, is a clearer case of domestic discretion, but state-owned rail operators are commonplace across the EU, so the freedom lies in the specific contracting model rather than in ownership itself.
Great British PAC’s assessment is that the Chancellor has used powers repatriated at the end of the transition period and should say so without embarrassment. Tariff-setting is the clearest case: a competence returned in full in January 2021 and exercised this week on gherkins, garlic and chocolate. Subsidy control and procurement are different. They are new frameworks, not new permissions, and ministers should be candid about the difference rather than claim a freedom they do not have.
The organisation’s wider concern is accountability. The Chancellor has announced a four point rise in taxes on savings and rented property, in two stages and against his own watchdog’s warning, deferred the defence arithmetic to a review, and attached a £21 ceiling to a tariff policy whose official costing runs to tenths of a penny in the pound and which independent analysis suggests will struggle to reach the basket. The Prime Minister, meanwhile, is inviting the country to reopen the question of EU membership without yet telling it the terms.
Labour spent a decade describing the powers returned in 2020 as a consolation prize. A party that believes that will not use them with confidence, and a Budget that treats them as an inconvenience will not deliver the growth it advertises.
The Budget’s most useful measure may be the one Mr Healey did not mention. Line by line, it demonstrates what Westminster can do when it holds the pen. The powers are there. On this evidence, the government has not decided whether it wants to keep them.
