Budget days are supposed to bring a degree of clarity. For all the political theatre, they remain one of the few moments when a government must translate narrative into numbers. If governing is about choices, the Red Book is where those choices become visible. Who is protected. Who is squeezed. Where ministers spend their political capital. Where they avoid the fight.
On that test, this was not a Budget for a strategic state. It was a Budget for short-term survival.
The headline is familiar. A record high tax burden entrenched for the decade. Borrowing higher in every forecast year than previously planned. A promise of restraint pushed into the later years through back-loaded tax rises and efficiencies with no delivery mechanism behind them. Spend now. Squeeze later.
The deeper story is about the kind of state this approach locks in. The risk is that the UK is caught in a vicious cycle of permanent fiscal crisis reinforcing endemic short-termism. Public services asked to do ever more with less. Civil servants expected to deliver politically painless productivity gains. And worst of all, no serious attempt to build the capabilities that would make genuine productivity and prevention possible.
For anyone who cares about building a strategic state, this is exactly the pattern that has to be reversed.
A budget designed for survival, not strategy
In earlier work we argued that a strategic state must achieve three objectives: set long-term priorities that outlast individual ministers; align money, institutions and capabilities behind those priorities; and maintain discipline when the political weather turns rough.
Budgets are the exam paper for that idea. Strategic states use budgets to deepen commitments, confront uncomfortable evidence and invest in the machinery that makes reform deliverable.
That is not what we saw last Wednesday.
The government raised taxes significantly to create additional headroom. It tolerated higher borrowing in the near term. It pencilled in impossible restraint for the Spending Review period that follows. Ministers repeated familiar promises of efficiency, fraud reduction and asset management. And they avoided addressing the structural drivers that will define the shape of the state for decades: the impact of ageing, health and social care, local government finance, children’s services and special educational needs.
This was a budget for political survival – not a budget for growth, prevention or long-term fiscal sustainability. By that narrow yardstick, it succeeded.
A strategic state would have done something different
There are examples of more strategic use of budgets overseas: Sweden’s long-term fiscal architecture created in the late 1990s; New Zealand’s wellbeing framework; Singapore’s sustained investment in capability; Germany and the Nordics with their stable assignment of powers and revenue to regional governments.
These systems are by no means perfect. But they show that budgets can be used to build resilience, align money with missions, empower places and reform institutions. Yet Westminster still uses budgets to muddle through to the next fiscal event.
Reform without strategy: The limits of efficiency
The chancellor is right that the British state needs to become more productive. Citizens deserve better value from public services. But this Budget’s version of productivity was the familiar one: greater efficiency, more digital technology, more fraud reduction, more central control.
Individually, these are not unreasonable goals. Collectively, they reinforce a narrow view of reform where civil servants are asked to deliver savings on demand while the state continues to do everything it did before. That is not strategy. It is managed decline with modern branding.
Piloting total place budgeting is a striking example. This is an idea so obviously right that the fact it still needs a pilot to demonstrate its efficacy highlights the centre’s continuing scepticism about place. A strategic state would hard wire place-based budgets into mainstream practice, not treat them as a policy experiment.
The Budget’s quiet signal: Resilience must now come from below
Those committed to strengthening public institutions know the real story of this Budget. Innovation and change will now be driven from the regional and local tiers – not Whitehall. If there is to be any serious progress on growth, prevention and resilience, it will come from combined authorities, local councils, Integrated Care Systems and place-based partnerships.
Whitehall’s instinct remains control. But current challenges demand the opposite approach. The centre should be thinking about how to let go of more power, not how much it can still retain in Whitehall.
Local government: Still exposed, still carrying the risk
There are glimpses of progress. The SEND settlement is a more honest approach. High needs funding has increased, while central government has finally acknowledged that historic and future dedicated schools grant deficits must be confronted. But that falls well short of the comprehensive, fully-costed guarantee councils need. Until the local government finance settlement clarifies how local liabilities will be handled, the fiscal risk still remains with councils.
The broader context for local government is bleak:
- The new council tax surcharge breaks the longstanding principle of retention
- Business rates changes are revenue-neutral but add new administrative burdens
- Pressures in adult social care, children’s services and temporary accommodation remain unresolved
- New investment tools are concentrated in mayoral sub-regions with combined authorities
- Thirty councils are already relying on Exceptional Financial Support
A strategic state would treat this as a red alert and act decisively.
Housing: Another missed opportunity
Much attention is being given to the Mansion Tax, but it does little for the overwhelming majority of citizens in relation to housing and living standards. The Budget offered marginal help for low-income households through wage increases and welfare support but continued to avoid the structural issues: a first-time buyer product that genuinely shifts the market; a Local Housing Allowance uplift that could prevent thousands of homelessness cases at minimal fiscal cost; a serious response to rising temporary accommodation.
There were some positives: commitments to major infrastructure projects; green book review pilots; area-based budgets; new towns; expanded business rate retention and a new tourism levy. These are steps in the right direction, but the delivery burden will fall on places already managing deep structural pressures. The focus on pace is welcome, but pace without capability is not reform. it is risk.
Health and care: Prevention still missing in action
The uplift in health and social care spending falls far short of extra demand created by demographic pressures. That demand is rising in complexity and volume. Many councils identify social care costs as a primary driver of financial instability. The long-awaited absorption of SEND costs from 2028 is welcome but the absence of a plan for existing deficits leaves a major fiscal risk sitting in local balance sheets. The sector now waits for a Schools White Paper that needs to be more ambitious than anything seen in the past decade.
The removal of the two-child limit in Universal Credit is a rare moment of clarity. It will lift 400,000 children out of poverty. But a comprehensive child poverty strategy is now essential. Without it, the Budget’s single bold move is not enough to shift long-term outcomes.
What this means for civil servants and public service leaders
For readers of Civil Service World, the implications matter.
First, accept that the high tax, low headroom world is now the baseline. Reform must come from redesign: reshaping demand, reorganising work and leveraging technology to change operating models.
Second, fight for clarity of purpose. Strategy is about choosing what to protect, what to grow and what to stop. Without this, everything becomes a priority and nothing is delivered well.
Third, expose the choices behind the language of efficiency. Every saving has consequences. Show the trade-offs honestly. Offer alternatives based on new service models, not marginal cuts.
Fourth, protect and develop capability. Digital, data, analysis and operational delivery are the state’s critical infrastructure. If they are raided again, productivity will collapse.
Finally, think in terms of creating institutions. If the frameworks we work within will not make sense in ten years, we must build the case for different ones. A strategic state is built on institutions that endure, not temporary fixes.
The test of a generation
This Budget is another chapter in the story of a state that has not yet learned to think and act strategically. Ministers make the choices but civil servants and public service leaders shape how the system responds.
We can continue with a cycle of high tax, low strategy and permanent firefighting. Or we can use this moment of constraint to argue for a genuinely strategic state: more focussed, more capable and more honest with citizens about what is possible.
That is the real exam paper the Budget sets. The mark will not be found in the Red Book. It will be visible in the performance of our public services and the trust citizens place in the state a decade from now.
Patrick Diamond is professor of public policy at Queen Mary University of London and a former head of policy planning in No.10. Vijay K. Luthra is a public service transformation specialist and former civil servant, local government councillor, school governor and NHS NED