Cloudy with a chance of tax rises

If the past few days had a theme, it was the overshadowed political event.

Reform UK arrived in Birmingham determined to look like a government-in-waiting. Instead, its conference was dominated by allegations that senior figures discussed ways of circumventing rules on foreign donations. Two senior aides stepped aside, and Nigel Farage was left insisting that no illegal money had been accepted. In the aftermath, the carefully choreographed policy announcements – designed to bolster Reform UK’s flagging support - struggled to get much oxygen.

There was, nevertheless, some chatter beneath the noise. Robert Jenrick pledged to raise the personal allowance from £12,570 to £15,000 within Reform’s first 100 days in government, costing around £18bn a year. The party says this would form part of a wider programme of around £80bn of spending reductions, including £52bn from welfare.

Richard Tice, meanwhile, promised to cut household energy bills by £250 by stripping out policy costs, carbon charges and VAT, alongside Reform’s increasingly explicit support for expanding domestic North Sea oil and gas production.

In contrast, John Healey faced a different kind of overshadowing today. His first major economic speech as Chancellor is deliberately optimistic: growth, investment, devolution and a more active state, including £150m for fast-growing northern businesses and greater freedom for city regions to develop their own industrial strategies. He has also promised to cut regulatory costs by 25 per cent by the next election, currently due in 2029. The optimism was designed to sit in stark contrast with the doom and gloom practiced by his predecessor, who he nevertheless took time to praise.

Unfortunately for Healey, the bond markets have not read the script. Rising borrowing costs have potentially cut his fiscal headroom from £23.6bn to around £13bn, according to one recent analysis. With Burnham simultaneously promising more spending on social care, defence and the cost of living, the arithmetic points stubbornly towards either hefty cuts or higher taxes at the October 28 Budget - and probably some combination of the two.

And in the background, the shadow looms ever larger. Anti-migrant protests disrupted Dover and Portsmouth over the weekend, while Germany’s AfD took almost 44 per cent of the vote in Saxony-Anhalt. Both are reminders that economic frustration, migration and anti-establishment politics are increasingly difficult to separate.

For Healey, that makes delivering on October 28 and beyond more than an economic challenge. It may be the central political challenge of the Burnham government.