ANDREW NEIL: Labour believes in deficit reduction on the never-never. The more Healey talked of prudence, the more we noticed his profligacy...

Chancellor John Healey kicked off his first Budget by getting his excuses in first. The wars in the Gulf and Ukraine , he began, were creating global storms which could quickly confound the official forecasts and knock the UK economy for six. In other words, if it all goes pear-shaped, don't blame me. It will be because of events beyond the control of a mere British Chancellor. Not that the official forecasts, from the Office for Budget Responsibility (OBR), are that great anyway.

Economic growth was nudged up for this year from 1.1 per cent (its March forecast) to 1.2 per cent. Such tinkering is usually done by economic forecasters just to show they have a sense of humour after all. But growth next year was downgraded from 1.6 per cent to a mere 1 per cent, indicating we really are in for some tough times this winter and beyond. Yet, despite this near-stagnation, the OBR thought inflation would hit almost 4 per cent early in the new year – twice the official inflation target.

Stagflation in action. These are not forecasts of an economic cornucopia to come. All the more reason, Healey averred, for 'fiscal discipline' to 'underwrite everything we do'. Yet the more he talked of his prudence, the more we noticed his profligacy. Take this financial year's budget deficit (2026-27). At the time of Rachel Reeves ' first Budget in late 2024, it was forecast to be £89billion (up from £69billion on the OBR's last March 2024 forecast under the Tories ).

By March this year, the forecast had reached £116billion. At least that was a step in the right direction after a £134billion deficit in Labour's first full financial year (2025-26). Chancellor John Healey averred for 'fiscal discipline' to 'underwrite everything we do'. Yet the more he talked of his prudence, the more we noticed his profligacy, writes Andrew Neil But yesterday we learned it's now forecast to be £132billion — which is pretty much the same as last year.

So much for fiscal prudence. In truth, Labour is addicted to debt. After fewer than two-and-a-half years in power, Labour has added a cumulative £260billion in borrowing over five years to the deficit plans and forecasts it inherited in July 2024. Even that has not satiated Labour's appetite. Yesterday it added another £65billion to borrowing between now and the end of the decade. It is the signal achievement of this Labour government that it has managed to combine an extra £325billion in borrowing with the highest tax burden in British history .

For what? Growth is anaemic, unemployment (especially youth unemployment) has risen, job vacancies have collapsed, living standards are stagnant. Nothing, it seems, can cure Labour of its addiction. The main reason borrowing has turned out to be higher than expected this year is the rise in the cost of servicing the national debt – £14billion more because lenders are demanding higher interest rates from us. It will be around £120billion this year, more than spending on defence and law-and-order combined.

You'd think that might give Labour cause to pause. But not a bit of it. On the Government's current fiscal trajectory, the annual cost of debt service will be £160billion by 2031. We will likely be spending more only on health and welfare. Labour believes in deficit reduction on the never-never – in the sense that it never happens. It increases borrowing in the current year and the next two. Then it squeezes spending in the years after that to be able to claim it's embarked on a strategy of deficit reduction.

Except that the squeeze in the outer years never happens. That's what Reeves did in her two Budgets — and it's what Healey did yet again yesterday. Borrowing up on previous plans this year and next, tough fiscal discipline in the years after that. But nobody expects Labour to go for the drastic spending cuts towards the end of the decade that its forecasts imply. Current Labour plans indicate cuts of 2.3 per cent in real terms in many areas of public spending between 2028-29 and 2031-32.

If you believe that, I have several bridges to sell you. Healey – seen delivering the Budget to the Commons – also introduced a raft of tax changes, only one of which (doubling the bank surcharge) will raise any decent amount of money After all, this is a government which is spending around £1.4trillion this year, a sum from which yesterday it didn't cut a penny – not a sous, not a cent, not a groat. So if you expect deep real-terms cuts in spending come 2029-30, then you must also believe there are fairies at the bottom of your garden.

Yesterday's Budget kicked every difficult spending decision into the long grass. More for defence? That will have to wait until next year's spending review, likely not before the autumn. No doubt president Putin will hold off doing anything nasty till we get our defence ducks in a row. Tackle the ballooning welfare bill? That will have to wait for various reports. Meanwhile the total welfare budget soars, almost out of control. This year it will be £353billion, up £19billion on the year.

In March, the OBR forecast it would be £406billion by 2031. Now it has revised that upwards to £431billion. Yesterday, Healey also introduced a raft of fiddly tax changes, only one of which (doubling the bank surcharge) will raise any decent amount of money. But they will make what is already the longest tax code in the world even longer – and more complicated. Too much tax and too many regulations have already drained British enterprise of much of its animal spirits.

There was nothing in the Burnham-Healey Budget to restore them. Nor to kickstart a new bout of prosperity. In the run up to the last election, one of Labour's more telling criticisms of the Tory government was that living standards for those on average incomes had flatlined for over a decade. It was broadly true. Here's another truth, revealed in yesterday's Budget papers. Living standards are set to flatline under Labour too. Real household disposable income – what households have to spend after tax and inflation – is forecast to stagnate for the rest of the decade.

So much so that living standards for most families will be no higher in 2030 than they were pre-Covid in 2019. So after one lost decade under the Tories, comes a second under Labour. Healey, of course, did not tell us any of that yesterday. He was too busy sugar-coating his limp Budget measures and ignoring the deep economic issues that need to be tackled if British decline is to be reversed. Labour thinks it just needs to get through a difficult winter – with the help of a multiplicity of small handouts – and things will start to come right under the Burnham ten-year plan for socialist nirvana.

In reality, Labour's problems will only be beginning come next spring – and Healey's first Budget will be seen as at best an irrelevance, at worst a massive missed opportunity.