The Commons: The Autumn 2024 Budget And The Future Of Austerity Vs. Investment
Dan Kitwood
The Autumn 2024 fiscal budget, unveiled amid mounting public discontent, is sending ripples through the UK’s political and economic landscape. Following the budget, the independent financial advisory body, the OBR, forecast that due to decisions in the budget, the Government had around £9Bn of ‘fiscal headroom’. With the Spring statement scheduled for later this month, the government intends to use this opportunity to further push its fiscal agenda. This includes measures intended to stabilize the economy, increase investment in public services, reduce the UK’s public debt, and to signal a fundamental shift in government priorities. However, the fiscal rules that the chancellor, Rachael Reeves, has imposed on her own administration has significantly limited her options. Recent revisions to growth forecasts indicate that disappointing GDP performance may soon deplete the £9 billion headroom, raising concerns that further spending cuts, particularly in welfare, could be imminent
Labour argues that the Autumn budget intends to reassert fiscal discipline after years of economic mismanagement by the Conservative Party. The budget contained tax-rises, targeted spending cuts, and adjustments in capital spending, particularly major boosts to education, healthcare, and other public services. Overall, this was projected to allow the much-touted £9 billion fiscal headroom. The Chancellor emphasized that these measures were necessary to restore confidence in the public finances and to help meet the UK’s long-term debt targets, which, according to the OBR, remain a pressing concern with debt now nearing 100% of GDP.
Despite the ambitious goals set out in the Autumn budget, early indications suggest that the plan is not unfolding as expected. The OBR’s revised forecasts point to underwhelming GDP growth, which is rapidly eating into the £9 billion of fiscal headroom that the government hoped to maintain. Slower economic recovery means that revenue growth is lagging behind spending commitments. This fiscal squeeze has left the Chancellor, with fewer options than originally anticipated, and there is growing fear that spending reviews may be forced upon the next Spring Statement.
While the budget sought to stabilize the public finances, it did so by imposing strict fiscal rules on the administration. These rules have constrained discretionary spending and forced the government to prioritize long-term debt reduction over immediate investment. Critics argue that such measures risk stifling economic growth and undermining the very public services that many Britons rely on.
Furthermore, the stringent fiscal rules imposed on the administration have created a policy “lock-in” that limits flexibility. With debt levels high and growth subdued, any deviation from the tight fiscal targets is seen as risking long-term financial instability. Such an inflexible approach has left the government little room to maneuver in response to unforeseen economic shocks or changes in global conditions.
There are many, especially on the left, who fiercely oppose any further cuts to spending, branding them as similar to the 2010 austerity cuts carried about by David Cameron. Instead, they argue strongly for a wealth tax on the top 1% to make up the shortfall. While countries such as Spain and Norway have managed to successfully implement wealth taxes, these kinds of levies take significant time and resources to get right. A wealth tax done too quickly will inevitably have loopholes that would allow those targeted to move money out of the UK, potentially losing the treasury revenue overall. To further complicate things, Reeves has promised that there would only be one major fiscal event a year, which makes any form of tax rises or levies politically impossible without breaking her word.
If tax rises are off the table, the question then comes to spending cuts, and the government seem to be gearing up to target benefits. At time of writing, no official government sources have confirmed any specific measures, however, Keir Starmer has said the benefits system currently is “unfair and indefensible”. Reports in the media of proposed reforms include freezing increases in certain welfare benefits and tightening eligibility criteria. These reports also suggest that these reforms could affect state pensions, unemployment benefits, and housing support, with many warning that such cuts would hit the poorest and vulnerable the hardest. Many Labour MPs, particularly those from the party’s left wing, have decried the proposed welfare cuts as a betrayal of the social safety net, and are lobbying the government internally to not go through with the policy.
The fallout from the financial decision in the Spring statement are likely to affect public perception. Voter discontent with ongoing austerity measures has been a key driver of political shifts in recent years. If the government is forced to implement further cuts, especially in welfare spending, this could galvanize opposition support among working-class voters and those who depend on benefits. Labour’s internal divisions, highlighted by vocal dissent from backbenchers, pose a significant risk. A perception that the party is abandoning its core principles in favor of austerity could alienate traditional supporters and benefit opposition parties such as the Greens, Liberal Democrats, or ReformUK. Moreover, if public services deteriorate or poverty worsens as a result of fiscal cuts, electoral backlash may force the government to reassess its priorities.
As the Spring Statement approaches, all eyes will be on how Reeves navigates these treacherous fiscal waters. The coming months will determine whether the government can successfully balance debt reduction and public investment or whether the pressure to impose further cuts will ignite a political crisis. In an era of economic uncertainty and shifting global dynamics, the decisions made now will shape Britain’s future for years to come.
