UK Budget 2025: A triumph of meta-argument over policy narrative

A lot has been written already about the UK Budget, delivered on 26th November. There has been no shortage of critical engagement with individual policy measures and with the Budget package taken as a whole. It’s fair to say the Chancellor has not had a comfortable ride. Yet the lead story is probably not about the detailed content.

It has been a difficult Budget because of the debates around it, rather than those within it. Meta-argument has threatened to overwhelm the substance. Three points have struck me quite forcefully: the dominating influence of the Budget politics, the parallel debate on the fiscal watchdog, and the surprising absence of an international framing. The result is a Budget that has landed without a centred and settled narrative.

Politics of the Budget redoubled/on steroids

It is a truism to say that budgets are all about politics. But this UK Budget has subordinated economic and fiscal policies beneath political arguments and interpretations more than usual. One obvious explanation was the very long lead time of pre-Budget speculation, while another was the extent of briefing and ‘un’-briefing by the government in advance of the Budget. A third was the choice, at least implicitly, not to provide a strong narrative about what the government wants to achieve in overall policy terms through the Budget. Absent a guiding narrative that can be promoted, contested and debated, the space is left open for multiple competing interpretations – and for plenty of noises off.

Much journalistic ink has flowed on the question of whether the government would break a manifesto commitment not to increase the major taxes that affect ‘working people’. And debate continues about whether it did break the spirit of out promise by extending the freeze on personal income tax thresholds. Meanwhile adjacent newspaper columns—as well as opposing sets of politicians—are debating whether the Budget signifies, in essence, a net transfer of taxes from the working population to welfare payments for those out of work. This matters because the government wants to be seen as championing working people. Elsewhere in the press, a verdict is forming that the Budget relegated economic growth objectives in favour of settling the financial markets with an increased fiscal buffer and of shoring up support from backbench Labour MPs through higher spending.

A positive interpretation of the government’s fiscal objectives would be that it is pursuing an approach of strategic ambiguity to try and satisfy multiple competing, and probably irreconcilable, political interests and priorities. A less favourable view would hold that the government lacks a clear and coherent vision and agenda for what it wants to achieve, and thus it has reached for a barrage—or a ‘smorgasbord’—of small measures in place of a clear and compelling strategy to drive growth. It’s too early to determine whether its approach will pay off in timeframe of the current Parliament.

Into this difficult mix, one must add the fractious and adversarial tenor that persists in UK Parliamentary politics since the Brexit debates of the late 2010s, as well as the high levels of public scepticism about politics and mistrust of politicians of all stripes. These strong currents doubtless make the task of fashioning and selling a Budget ever harder. The upshot has been a very messy discourse around the 2025 Budget that has focused on the politics far more than the policies.

Rise (and fall?) of an independent fiscal institution

The UK’s independent fiscal watchdog, the Office for Budget Responsibility (OBR), has loomed heavily over this Budget. Through its bi-annual judgement on the credibility and sustainability of government fiscal policy, the OBR already wielded great influence. The brief Truss premiership in 2022 railed against what it perceived as the economic orthodoxy of institutions like the OBR and sought to weaken their role, but her ill-fated ‘mini-Budget’ served conversely to guarantee the OBR’s future prominence. It has become firmly embedded in the UK fiscal ecosystem and was strengthened last year by further legislation.

The OBR has made the headlines repeatedly around the present Budget. It took the decision to downgrade its UK productivity growth forecasts after many years of overestimation, thereby increasing the future fiscal gap facing the Chancellor. It then mistakenly released online a report with the details of the Budget an hour before the Chancellor stood to deliver her speech in Parliament. And it then intervened after the Budget to clarify when it had shared its pre-Budget forecasts with the government, thereby challenging the Chancellor’s stated rationale for strong revenue-raising measures.

The first of these proved a contentious decision in terms of the timing, although it was fully within the mandate of the OBR. Its political contentiousness speaks in part to the status the OBR holds. The second has been viewed as a serious error and has harmed the OBR’s reputation. It had little material effect as the details of the Budget had already been pre-briefed by the Treasury. Yet the leak still prompted the resignation of the OBR Chair. The third marks an unusual direct intervention into political debate; it speaks to the OBR’s new and pressing concern to safeguard its integrity. A new Chair must decide whether to maintain this course.

Despite the objections levelled at the OBR, it remains an international example of a robust and effective fiscal institution. It owes its standing, somewhat paradoxically, to combination of political decisions first to try and circumvent it in 2022 and then actively to reinforce its function in 2024. Critical opinions that now single out the OBR as a problem can miss the point that it is only one piece of a wider fiscal system. A more useful question to ask is whether the overall institutional balance and calibration is right, or whether one institution has been over-emphasised.

International issues missing in the Budget action

It is striking that global fiscal pressures and the global economy did not get much coverage in a Budget speech which emphasised the domestic picture. Labour has repeatedly pointed to its difficult fiscal inheritance from the Conservative governments that preceded it as the reason for its tough choices and any unpopular measures over the past eighteen months. The Sunak/Hunt 'black hole' and the Truss 'mini-Budget' remain favourite targets. Valid and politically expedient as this argument may be, pressures in the international arena offered a different explicatory narrative for the government’s fiscal policy choices.

Many of those headwinds in 2025 have come from across the Atlantic. Uncertainty about the US commitment to NATO and the security obligations to European countries under the second Trump Presidency is pushing large increases in defence sector spending commitments and the (very) gradual pursuit of greater European self-sufficiency. The shift in US posture towards Ukraine’s defence and security is pushing a greater burden share onto European countries, including the UK which is jointly leading a ‘Coalition of the Willing’. Policy volatility and uncertainty about US tariffs and future trade policies towards the UK is a further driver of fiscal risks and pressures. Even if the government would not want to allude explicitly to the US administration, the pressures are credible and compelling for a public audience.

The Budget set out policy measures that will raise the revenue share of GDP to an historic high of 38%. It would have been an easy pivot to invoke external pressures as force majeure reasons for needing to raise tax levels and to hold the reins on expenditure. Stability and resilience have been watchwords for the Chancellor since back in opposition. That chance was not taken in the Budget last year, nor again this time. Perhaps it was thought too risky, or perhaps too hard to explain.

More surprising then was the raft of global issues suddenly deployed by the Prime Minister in defending the Budget as it risked unravelling after delivery. There was a 'landmark' UK-US pharmaceuticals deal announcement, a green light encouragement (with some cautions) for UK businesses to improve commercial ties with China, and a call to keep moving towards a closer economic relationship with the EU. These look like some pieces of a potential narrative on how to drive economic growth, yet they emerged only as post-Budget afterthoughts.

(Why) does it matter?

The next UK General Election is still some three years away and it would be stretching an argument to say that this Budget will affect that result in any direct policy sense. Even the next set of electoral tests in May 2026 is probably beyond the influence horizon of this Budget. Stable financial markets and a satisfied Parliamentary party should be enough to carry the Prime Minister and Chancellor through to the next staging post. Thereafter the real policy test of the Budget will be whether it helps to spur improved economic growth and productivity in the medium term – on which the (increasingly sceptical) jury is still out.

That brings us back to the problem of a meta-argument around the Budget, in the absence of a commanding narrative. The risk for the Chancellor is the impression given of a Budget not capably done – too little dexterity in the political strategy, too many distractions with the OBR, and not enough firepower in the policy reasoning. While none of this was fatal, it makes the task of restoring confidence a good deal harder.

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