Yes, the Budget was disappointing – but not for the reasons you think

Looking back, it’s hard to choose: the name-checking of a primary school in Hartlepool, or the potholes. There were other moments, but those two stood out.

In her first Budget – Labour’s first for 14 years, and the first to be delivered by a woman – chancellor Rachel Reeves said the school in the northeast of England would be rebuilt, and that an extra £500m would be spent on repairing roads.

Sadly and tellingly, both announcements were greeted with cheers from those sitting behind her. If anything summed up the short-termism and lack of vision bedevilling our national politics, it was this. In the country that once possessed pioneers and geniuses such as Isambard Kingdom Brunel and Robert Stephenson, what was meant to be a sales pitch for the British economy – billed, repeatedly, in the run-up as “historic” – was reduced to trivialities.

Of course, the school repair and gaps in the tarmac have their place. But in a speech of this magnitude, with the rest of the world watching – really?

It felt like a Goldilocks budget, of taking just a bit from here, just a bit from there. What it added up to, the sum total, was not much at all. Not in terms of getting the nation moving, and not where future growth is concerned. We were treated to a series of patch-ups, aimed at addressing the failings of the party opposite.

Fair enough, we understood they’d not done much in their 14 years in charge. But anyone seeking the bigger picture – how Reeves was going to ensure that Britain was better placed internationally, so that investors would be queueing up to come here – will have been disappointed. At times, her address seemed like a weekly round-up of back-office maintenance jobs rather than someone setting out the stall for a country’s long-term prosperity.

In her weird way, Liz Truss understood. She made her premiership all about growth. Unfortunately, what she proposed was too much too soon, and she paid the price.

When he became prime minister, Rishi Sunak ordered his cabinet to ask their departments to submit ideas for growth – the one proviso being that they could not copy those of Truss. Alas, unless one of them breaks cover, we will never know what those memos contained.

Here we are with Keir Starmer’s administration, which, given the size of his majority, could be in power for two or even three terms. This was an opportunity to put down a marker for how Starmer and his colleagues are going to grow the economy. But there was precious little sign.

It’s a critical challenge. Ever since the 2008 financial crisis, Britain’s track record in this regard has been dismal. Back in March, at the final Tory Budget, the Office for Budget Responsibility (OBR) was forecasting a relatively healthy 0.8 per cent for this year and 1.9 per cent in 2025. That was ahead of the independent consensus of 0.4 per cent for 2024.

Now, the OBR is saying 1.1 per cent growth for 2024 and 2 per cent next year. Good, but here’s the rub: they’re predicting it will slow to 1.8 per cent in 2026, and settle down to around 1.5 per cent.

Not only is that a poor prognosis, but it leaves unanswered the question of how the national debt is to be reduced. Reeves is taxing, spending and borrowing. It’s all about tidying and day-to-day management, rather than galvanising and driving forward.

Her Budget was about tilting the balance. It was skewed towards the public sector, pacifying those workers, their unions, and the folks sitting on the benches around her, many of whom worked in the public service before entering politics. This, though, is a state machine of stultifying low productivity, 6.8 per cent below its pre-lockdown level.

Post-Budget, taxes will climb during this parliament, from 36.4 per cent of GDP to 38.2 per cent – a startlingly high proportion. Not for nothing does this have the feel of a return to the 1970s, when the unions ruled the roost and taxes were high. Growth then was also going nowhere.

Whisper it, because it’s not acceptable to say in certain company, but Mrs Thatcher made the switch, reducing the state and enthusing the private sector. Taxes fell, and Britain went from being the sick man of Europe to just about the strongest.

Of course, Thatcherism came at a cost, and not all she did is worthy of acclaim, but business was motivated and the economy grew. This is what the present government is forgetting or choosing to ignore: that growth will come from private business, not public officials.

In particular, it will originate from SMEs, often easily overlooked as the engine room of the economy. They’re the ones left to pay an increased national living wage while having to cope with higher national insurance contributions. They must also deal with the new workers’ rights law, which will only add to the red tape and regulatory burden. For these businesses, now, it’s all about cutting back rather than investing and expanding. New job hirings, additional revenue streams and extra branches are hastily being put on hold.

What was required from Reeves was the inclusion of some inspiring, grand announcements. Instead, it was all about making small gains here and there – penny-pinching, not raising the bar. Britain’s infrastructure is creaking, yet there are now no large-scale projects anywhere. The bloated, costly disaster of HS2 has frightened everyone away.

Without a hint of irony, the chancellor was able to confirm that the much-reduced high-speed line will terminate at Euston. The notion that it would end somewhere other than a London terminus was always pure folly; it’s a return to the original plan, but somehow billed positively as progress.

Major construction works are a statement of intent and ambition. They’re about the public sector drawing the best from the private, about the two combining – one with the mandate and financial wherewithal, the other with the skills and supplies. Other countries know this and get on with such projects. Here, our chancellor and her civil servants are rebuilding a primary school and filling in holes in the road.