Expert comment: Budget deja vu: have we been here before?
As the Chancellor prepares to deliver the 2025 Autumn Budget against a backdrop of constrained public finances, slow growth and persistent inflation, the question arises: have we been here before?
From the post-war financial constraints of the 1950s to the economic turbulence and inflationary pressures of the 1970s, the UK has repeatedly confronted difficult decisions involving reductions in public spending or increases in taxation. Glen O’Hara, Professor of Modern and Contemporary History at Oxford Brookes University, explores the lessons history can offer — and reflects on what a future historian might eventually say about the current government’s attempt to navigate today’s economic pressures.
1. What did the 1970s teach us about inflation politics?
Inflation politics is deeply corrosive to any rational or ordered politics at all, and even a moderate level can be fatal to governments’ re-election prospects (just ask Joe Biden). People’s savings decline in real value; public services and benefits struggle to keep up; theories of value, and wage differentials, are disordered and compressed. It’s good for the UK in this respect that inflation is abating from the huge spike we saw caused by Russia’s aggression against Ukraine, but we’re by no means out of the woods yet: if inflation keeps going at around 2.5% to 3% next year, that is still a level elevated rather above what we’ve seen since the turn of the century.
2. Are we heading back to, or worse, are we already back at 1950s style austerity?
We’re nowhere near the levels of 1950s austerity, either in the public or private sectors. Most people’s lives are so much better now than then as to be unrecognisable. More than half of households did not even have a bathroom in 1950; pensioner poverty was rampant, and the state pension had been set at far too low a level to turn that situation around.
3. Why do governments spend more before elections?
Governments have often spent more before elections for the simple reason they want to get re-elected. In recent years that has got more and more difficult because UK governments have put themselves in an ever-changing range of straitjackets called ‘fiscal rules’ some years ahead. They hoped to follow up the relative success of giving interest rate policy to the independent Bank of England by outsourcing budget credibility to the Office for Budget Responsibility, with mixed results. To some extent, Chancellor Reeves is now trying to land the state’s accounts on a tiny head of a pin years away, when forecasts change hugely all the time. They’ll try to spend more in 2027 and 2028, but this time there’s no guarantee they’ll be able to.
4. Has any Budget in history ever ‘fixed’ the economy?
No Budget can fix the economy, because what governments are trying to do changes all the time. These days, because the real level of government debt has gone up in recent years, we focus on ‘the deficit’ of spending over tax revenues. But between the 1950s and the 1970s British commentators would have talked about a different ‘deficit’ all the time - the gap between exports and imports, in part because sterling’s value was supposed to be fixed and more imports than exports put downward pressure on it all the time. So if there’s no set ‘problem’, there can be no final ‘fix’.
5. What does the run-up to the 2025 Budget tell us about Britain today?
The Government’s really pressing need for money tells us what successive heart attacks have done to the British economy. There have been at least five of these since the Brown-Blair boom of the 1990s and 2000s: the Global Financial Crisis; George Osborne’s public sector austerity, especially on the investment side; Brexit; the Covid-19 pandemic; and the Russian energy shock. Britain simply cannot live through all those and have all the private sector and government consumption that it wants after all that’s happened, and it’s getting harder and harder to mask that reality.
6. What will future historians say about this Budget?
That depends on what happens next. In an optimistic scenario, the Government’s reset with the EU and various trade deals, combined with the investment boom that Reeves has made room for and planning reform, gradually takes hold and speeds up UK growth - both later in this Parliament and the next. In a pessimistic scenario, confidence remains low, growth anaemic and productivity sluggish. Then Reeves may have to come back for even more tax rises, and this Budget will be seen as one more missed opportunity to raise and reform taxes, shake up the economy and reassure voters and financial markets alike.