Five ways the budget shows Rachel Reeves is thinking long-term more than the Tories ever did

Chancellor Rachel Reeves presented Labour’s first budget^[1] in 14 years by promising to put an “end to short-termism”^[2].

British governments typically see budgets as an opportunity to present policies providing short-term gain in terms of public popularity, even if they do little to improve Britain’s long-term economic prospects. Over the past ten years, governments have adopted and then abandoned 11 different economic strategies^[3], and seven different fiscal rules^[4].

The last Conservative government’s budget contained a range of tax cuts, most notably a 2p cut on National Insurance. Little consideration was given to the medium-term implications of these cuts^[5]. Labour inherited a funding squeeze, alongside the need to balance the books over a five-year period based on the previous fiscal rules^[6].

This kind of short-termism is a familiar feature^[7] within British economic policymaking. A winner-takes-all, majoritarian electoral system encourages governments to prioritise electoral considerations^[8] over a longer-term economic strategy.

Here’s how Reeves is taking a different approach in her first budget.

1. Long-term strategy

Reeves has underscored Labour’s commitment to long-termism through various institutional reforms. The government had already announced the creation of a new body^[9] to drive a new industrial strategy. This will now be accompanied by a new National Wealth Fund^[10] to provide private investment into infrastructure.

The launch of the Office for Value for Money^[11] will scrutinise spending decisions. And the Office for Budget Responsibility’s role in assessing the impact^[12] of capital investments, government policies and departmental spending will be enhanced.

Want more politics coverage from academic experts? Every week, we bring you informed analysis of developments in government and fact check the claims being made.Sign up for our weekly politics newsletter^[13], delivered every Friday. 2. Investing for growth Alongside a few surprises such as an uplift to the minimum wage, increased tax on private jets and the continued freeze on fuel duty, the main theme of the budget was investment-led growth for the long-term. To that end, Reeves has changed the government’s fiscal rules^[14] around debt to enable more headroom for investment. She also raised national insurance contributions for employers to fund this investment wave. These measures will be used to plough £6.1 billion into “growth sectors”^[15] such as engineering, biotechnology and medical science. The chancellor committed £1 billion into the aerospace industry, £2 billion into electric vehicle development, and £500 million into life sciences. In total, the public investment will amount to £100 billion over the next five years^[16]. 3. Infrastructure projects Reeves also committed to funding a number of high-profile infrastructure projects^[17]. On transport, the TransPennine Route upgrade, East West Rail, and HS2’s link into central London were all green lit. She also promised £5 billion^[18] to build 1.5 million new homes in five years. Additionally, £20.4 billion in R&D funding was also protected in the budget. 4. Regional growth The budget highlighted the importance of regional growth and place^[19], reflecting Labour’s emphasis on continued devolution since taking office^[20]. Reeves has committed to providing an extra £6.6 billion to the devolved nations through the Barnett formula^[21]. She also revealed that the West Midlands and Greater Manchester^[22] would receive integrated financial settlements from 2026-27. These moves indicate some ambition and long-term vision around empowering devolved governments to drive regional economic growth. 5. Public services Another long-term focus of the government has been “fixing the foundations” of Britain’s public services^[23]. Reeves linked low levels of investment to crumbling services^[24]. As such, she committed to significant spending on education and health, alongside £1.3 billion to address the crisis of local government funding^[25]. These measures signpost a renewed interest in an industrial and economic strategy^[26] to address Britain’s economic weaknesses and drive growth. Both require a focus on the medium and long-term. Read more: One in five councils at risk of 'bankruptcy' – what happens after local authorities run out of money^[27] Remaining challenges Collectively, these measure suggest some long-term thinking by Labour, but do they go far enough and will they stick? Delivering on a long-term industrial strategy requires greater coordination across government^[28], especially between the Treasury and the Department for Business and Trade. But other departments too, will be key to driving long-term growth and must be brought on board with Labour’s approach .

References

1. ^{^} Labour’s first budget (assets.publishing.service.gov.uk)
2. ^{^} “end to short-termism” (www.lgcplus.com)
3. ^{^} 11 different economic strategies (www.ippr.org)
4. ^{^} seven different fiscal rules (www.economicsobservatory.com)
5. ^{^} implications of these cuts (www.instituteforgovernment.org.uk)
6. ^{^} fiscal rules (www.instituteforgovernment.org.uk)
7. ^{^} familiar feature (journals.sagepub.com)
8. ^{^} prioritise electoral considerations (theconversation.com)
9. ^{^} a new body (www.gov.uk)
10. ^{^} National Wealth Fund (www.gov.uk)
11. ^{^} Office for Value for Money (www.gov.uk)
12. ^{^} assessing the impact (assets.publishing.service.gov.uk)
13. ^{^} politics newsletter (theconversation.com)
14. ^{^} changed the government’s fiscal rules (www.google.co.uk)
15. ^{^} £6.1 billion into “growth sectors” (www.theguardian.com)
16. ^{^} £100 billion over the next five years (www.gov.uk)
17. ^{^} infrastructure projects (assets.publishing.service.gov.uk)
18. ^{^} promised £5 billion (www.architectsjournal.co.uk)
19. ^{^} regional growth and place (www.theguardian.com)
20. ^{^} since taking office (www.gov.uk)
21. ^{^} Barnett formula (www.bbc.co.uk)
22. ^{^} West Midlands and Greater Manchester (www.theguardian.com)
23. ^{^} public services (www.theguardian.com)
24. ^{^} crumbling services (www.theguardian.com)
25. ^{^} local government funding (www.lgcplus.com)
26. ^{^} industrial and economic strategy (www.instituteforgovernment.org.uk)
27. ^{^} One in five councils at risk of 'bankruptcy' – what happens after local authorities run out of money (theconversation.com)
28. ^{^} coordination across government (www.instituteforgovernment.org.uk)
29. ^{^} Neil Hall/EPA-EFE (epaimages.com)
30. ^{^} existing asymmetries (academic.oup.com)
31. ^{^} rise by 1.5% (www.ft.com)
32. ^{^} concerns were raised (www.ft.com)
33. ^{^} in 2028-29 (www.civilserviceworld.com)