It’s 24 hours on. On the tiny off chance some people won’t have read all 350 pages of economic charts and chat in the Budget and OBR documents, here’s a slightly shorter version of what you need to know. I’ve also included some reflections on the post-Budget debate so far – not least the importance of understanding that economic policy is about a lot more than tax and spend.

Have a good weekend everyone.
Torsten

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Iran impacts

The big economic news of 2026 is sadly the war in Iran. Wholesale oil prices are up around 60% since disruption in the Strait of Hormuz began, pushing up fuel prices and inflation (which the OBR thinks will peak at 3.8% early next year). This was always a painfully likely consequence of the war, which is amongst the reasons we didn’t support it (and why Kemi Badenoch and Nigel Farage were so wrong to do).

Higher inflation hurts household finances. It also means higher interest rates, which does the same to the public finances: higher inflation is what is pushing up government borrowing costs around the world. Us ministers famously “don’t comment on markets” so let me just describe what has happened: UK gilt yields have risen in line with the rest of the G7 this year, and actually a bit slower more recently.

Recognising resilience

Despite this global turbulence, the truth is that UK firms’ and workers’ hard work has seen the UK economy be far more resilient than anyone expected this year. The data has been telling this story for months, but it’s only just started being recognised in economic commentary. The UK has seen the fastest GDP growth in the G7 so far this year, with growth 0.5 percentage points higher than the OBR expected in March for the first half of the year. We also learnt that the economy grew 0.7% in the three months to August after the OBR had finalise the Budget forecast.

The most encouraging fact of all is why I am very keen to give the credit for this resilience and growth to British firms: business investment is currently running at its highest level in a decade. As an aside, that stronger business investment combined with lower levels of migration is why the OBR have actually revised up their average GDP per capita growth rates (which is the one that ultimately matters for living standards) from 1.1% to 1.3% in the latest forecast, despite the impact of the Iran conflict.

Boosting breathing (space)

This resilience is to be celebrated, but shouldn’t make anyone complacent. Higher energy prices have real economic effects that will bite this winter. So the Chancellor’s first big Budget choice is to offer immediate support to help the same firms and workers that have been so resilient so far. I won’t run through every measure but here’s some headlines of who benefits:

Britain’s buffer

To make that support possible while ensuring we keep cutting borrowing in each and every year, the Chancellor has made targeted choices on tax. That means raising taxes on banks, vape shops, high-risk gambling machines, and landlords. What he hasn’t done is overreact to the volatility in global energy and bond markets, rejecting broad-based tax rises that some have called for. Here’s the easiest way to see that. The OBR forecast for debt interest costs in 2029-30 (the fiscal rule year) is up £12bn relative to their March forecast, cutting broadly in half the £24bn headroom built up with responsible choices last year. Exactly because those choices were made last year the Chancellor can now use fiscal headroom for the exact purpose it exists for: responding to shocks (while partially rebuilding headroom to £15bn, which by the way is still higher than in every one of Jeremy Hunt’s fiscal events).

Changing course

On Radio 4’s PM programme last night, Evan Davis asked me why the Budget didn’t end 40 years of neoliberalism. The keen can hear my answer here (from 39:43), but here’s a simpler answer to directly engage with those saying the Budget didn’t do anything because no big taxes were raised: there is much more to economic policy making than raising or cutting specific taxes. Far too little attention is being paid to some very big changes in this Budget that set the country on quite a different course for the decades ahead (I’ll leave you to decide when neoliberalism has been finished off).

First, on energy the Budget is setting an entirely new path – one that focuses on driving down electricity costs so our firms can compete, our households can cope, and decarbonisation can be delivered. There are two big shifts that move our energy system on from the post-privatisation norm that has driven bills up. We’re ending the business of loading levies onto bills. The Tories added £100 in their last decade, while we have already cut £150 off them last April. The Budget dumped another planned Conservative levy (to pay for hydrogen projects) and more fundamentally said that approach is over: no new costs will be allowed to be added to bills. Another mistake in the 2010 was giving the go ahead to renewable projects, while at the same time cutting the investment in the grid to connect those projects. This madness has left us now paying some electricity providers not to produce electricity. The Chancellor has ended that nonsense, saying only projects with a grid connection and that will lower bills will be given the go ahead. This isn’t about cheap power vs clean power: our focus on renewables has been key to cutting our exposure to the rollercoaster of gas prices, reducing the size of the Iran-induced energy price rise this winter. Most importantly, driving electricity prices down is how we reach net zero – because cheaper electricity is what means people will actually take up EVs and heat pumps.

Second is devolution. This government’s theory of economic growth is that local economic leadership, those with local knowledge and skin in the game taking decisions, is how we turn around Britain’s stagnation. Economic research supports that argument, IF we pass not just responsibility but fiscal firepower to those leaders. The Chancellor set out a comprehensive roadmap to delivering that fiscal firepower yesterday. Not just assigning 20% of business rates revenue to mayors from next April, but the following year assigning a share of income tax revenues: the first time income tax has had any element of devolution within England in the tax’s two centuries of existence. Our next chart showing the huge economic prize to be had from narrowing England’s regional productivity gaps, and in time people will look back on the Chancellors fiscal devolution roadmap as a very big deal indeed. Now we just need more of that fiscal devolution within Wales too…

Hope in every heart chart

The global economic news has been… gloomy. And the Budget has had to grapple with that reality. But I don’t want to finish on the gloom because there is way too much talking down the British economy. So here’s a chart using the OBR’s new forecasts to spell out that the hard yards of turning around the British economy are underway. GDP/capita growth is up, and forecast to remain so. The budget deficit is being cut. And employment? Higher today than in all but two peacetime years of the last 150, and above the average levels of the 2010s.

What is Kemi Badenoch’s big idea? The cynics amongst you will say there isn’t one, but you’d be wrong. Listen to what she has now come back to repeatedly over her two years of leadership and it is in fact now pretty clear that the Conservative leader has made her choice. What is the new big idea? Exactly the same as the Conservatives’ old big idea: unfunded tax cuts. It’s the lack of imagination as much as the fiscal incontinence that stands out.

Most won’t have noticed the sheer scale of Conservative promises of tax cuts. After all there is next to no scrutiny of a party in third place this far from an election. Plus they’ve been committed to not in a big bang moment, but via the drip, drip, drip of announcements that ill-disciplined oppositions often exhibit. So, this week, I thought we’d spell out what those drips now add up to, examine what history says would be consequences of this approach and what this tells us about the essence of modern Conservatism. A political movement that used to be about protecting our collective past from the inevitably short-termist present, has morphed over the last half century into one that thinks the secret sauce of politics is to offer a sugar rush today at the price of selling out Britain’s tomorrow.

The shopping list

So let’s start with the shopping list that the process of getting through just two Conservative conferences adds up to:

That’s more than £30 billion a year. And that’s being kind by largely using the Conservatives own figures for how much their plans would cost (nearer the election we’ll spell out the real costs), although it’s worth noting that on inheritance tax the Conservative Party have botched their costing so badly that independent experts say a change they claim costs £6bn could easily cost two thirds more than that. This isn’t the place to do justice to the specifics of the proposals, although note that the Conservatives have somehow managed to come up with a long list of tax cuts, costing £30bn, that offers precisely diddly squat to the classic striver: a median earning renter. Meanwhile, 40%, or around £4bn, of the IHT proposal could go to the richest 5% (with estates worth £1.75m or more).

But the problem I want to focus on today isn’t that these are hugely disproportionately tax cuts for wealthiest. It’s the sheer scale of what they have now committed to. What is £30 billion approaching the same scale as? The cost of the tax cuts promised by Liz Truss’ 2022 mini-Budget: £39 billion in 2025/26. This is a lettuce wilting level of financial incontinence.

Funding fictions

There are a number of different ways of understanding the obvious truth that promising tax cuts on this scale would have huge fiscal consequences

First, while of course the Conservatives will claim their tax cuts are fully funded, so did Liz Truss. Her mini-Budget said “The government is committed to fiscal sustainability and reducing debt as a proportion of GDP… The government will take the responsible decisions that are needed to achieve this aim, including keeping spending under control.” That went well.

Second, as always the tax cut promises are very concrete but the savings claimed to deliver them are nothing of the sort. On the welfare side, there’s lots of promising to undo damage the last Conservative government did – but those can’t fund future Tory tax cuts because… we’re already undoing that damage. For example, the Conservatives want credit for promising to reverse their own catastrophic decision to basically turn off face to face assessments for sickness and disability benefits. But reversing that mistake is underway right now.

Third, we can judge fiscal intent by what else the party is saying. If they can’t even bring themselves to support our plan to adjust the Triple Lock to put the State Pension on a sustainable basis (something Conservative MP’s galore, including the new Shadow Foreign Secretary, support) you can’t pretend to be remotely serious about controlling public spending.

History lessons

At one level though, engaging in all the specifics misses the big picture. History is very clear that when parties of the right get into the business of promising huge tax cuts before elections something reliably happens: the public finances get trashed. Sometimes so do public services. And then often the tax cuts themselves get reversed.

America is the central case study here. Ronald Reagan took office promising tax cuts and to end the deficits. By 1989 he had instead almost doubled the U.S. budget deficit. Fast forward to the 2000s and George W. Bush promised to cut taxes and the deficit. He did the former, but grew the latter to a record level by his last year in office.

In the UK George Osborne and David Cameron promised they could sort the deficit created by the global financial crisis AND deliver significant tax cuts for workers (raising the personal allowance) and firms (cutting the headline rate of corporation tax). The result was austerity, with such deep damage to public services that its legacy is still with us today. The same cannot be said for the tax cuts, both of which were substantially reversed by their own Conservative government.

Talking Thatcher

Now where does this leave modern Conservatism? As ever Conservatives define themselves as following, or occasionally distancing themselves from, Margaret Thatcher, the party’s lodestar of the last half century. Kemi Badenoch had another go at reviving the Thatcher ghost at her conference, publishing an essay whose title, The Right Way, play’s on the Thatcher era The Right Approach. She would like the point of continuity to be about being a serious conviction politician, but the tactical positioning on the Triple Lock rather blows that out of the water (Thatcher after all ended the earnings link and would have seen plans to see the pension rise permanently faster than earnings as entirely unaffordable).

I think there is a link though. It was in the 1980s that selling out Britain’s future in exchange for an easier today became a core tenet of Conservatism. Thatcher wouldn’t have dreamed of promising unfunded tax cuts on the current scale well ahead of an election. But if you look at Thatcher’s approach to the North Sea or privatisation, what’s clear is that was a government thinking about today not tomorrow. Had we invested the tax revenues from the North Sea from that period onwards, Britain would now have a sovereign wealth fund probably worth around £1 trillion. A simple look at the damage done to the public sector balance sheet (public sector net worth) under the 18 years of that Conservative government also spells out the consequences of not only selling off many assets at less than they were worth (from council houses to utility companies) but of spending rather than investing the proceeds.

This disease of never investing in Britain’s future continued into the 1990s (Ken Clarke is an amiable man, but his decision to basically end all public investment was a disaster). It was repeated in the 2010s, again slashing public investment and failing to use a period of near zero interest rates to deliver the nuclear power or grid upgrades the country so badly needs. And, never mind Liz Truss, what did we see ahead of the 2024 election after her irresponsible approach has supposedly been ejected from the party? £20 billion of tax cuts the then chancellor knew the country couldn’t afford but delivered anyway.

The political economy of modern conservatism since Thatcher is to offer unfunded giveaways today, while leaving Britain worse off tomorrow. On this basis at least Kemi Badenoch can call herself a real Conservative.

Here’s the full slide pack that accompanied my speech for those who are 1) very interested in pensions 2) weren’t in Liverpool.

Slides 1-9

Slides 10-18

Slides 19-26

Slides 27-28

There’s lots of data in the WEO (any keenies can read the whole thing or download the data) but here’s two charts that have the key headlines regarding the UK. First, the IMF confirm what we’ve seen in the GDP, retail sales and business investment data for a while: the UK economy has performed far more strongly this year than almost anyone expected, despite the real headwinds from the conflict in Iran. Back in April the IMF said that the UK would be the worst affected amongst major economies from the conflict, forecasting growth of just 0.8% in 2026. What has happened since? The UK has grown more than that in just the first half of the year (1.2% - which is the joint fastest of any G7 economy). So this week the IMF revised up their forecast for UK growth in 2026 to 1.3%, the joint second fastest in the G7 alongside Germany. The impact of the conflict in Iran is painfully real - which is one reason we opposed UK involvement even as Kemi Badenoch cheer led for it - pushing up on inflation (the IMF now expects UK inflation to rise in line with the rest of the G7) and expectations of interest rates. But that doesn’t mean we should keep ignoring the reality that British firms and workers have been impressively resilient thus far.

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The second crucial revelation is that someone at the IMF has been reading Charting the Course, because they’ve caught up with the strength of the UK’s fiscal consolidation in international perspective, which I wrote about a few weeks back. The IMF spell out that the UK is doing more than anyone else in the G7 to strengthen our public finances (something even experienced economic commentators regularly miss). In the words of IMF Managing Director Kristalina Georgieva, “the UK is actually one country where action to reduce debt and deficit has been taken decisively”.

As our second chart shows, we are delivering the fastest fiscal consolidation in the G7. And this isn’t just a promised consolidation, but one where action has been happening in the here and now (when people oppose our fair tax choices they are really opposing this deficit reduction). The IMF forecast the UK to have the smallest deficit in the G7 by the end of the decade and, rightly in my opinion, encourage other countries, not least France and the United States, to follow suit. This is UK fiscal exceptionalism of a very different kind from that offered by Liz Truss.

None of this is a case for complacency. I would like growth to be stronger still. Global conflicts will affect prices here in the UK, and they impact public as well as household finances. But the IMF have encouraged people to update what are often slightly lazy priors about the recent performance of the UK economy. They are right to have done so.

But let’s leave political philosophy and get into the practical policy. It’s just possible you’ve heard that he announced changes to the Triple Lock, the mechanism by which we uprate the State Pension each year.

To wrap up the week I thought I’d share some answers to the questions I’ve most often been asked over the past three days - including in the lobby briefing I did with shed loads of journalists immediately after the speech. Here goes.

What is happening?

Here comes the science bit, concentrate. We increase the State Pension every April. Since 2011 this is on the basis of the Triple Lock, which sees the State Pension increase each year by the highest of inflation, 2.5% or earnings growth. Note that because there are years when earnings growth is lower than inflation or 2.5%, this means that the State Pension grows faster than wages over time - this is the ratchet effect. When people say the Triple Lock is unsustainable, it is this ratchet they are talking about i.e. you can’t have a State Pension that permanently grows faster than wages.

Our 2024 manifesto committed to uprating on this basis throughout this parliament. We’re keeping that promise, which means that the full new State Pension is set to rise by over £2,000 across the Parliament and to reach a record high relative to earnings in 2029/30 of somewhat over 30%. This will see the permanent reversal of Thatcher’s decoupling of the State Pension from wages as our first chart shows. Her policy of it only rising in line with prices was a recipe for rising pensioner poverty (on which more below).

From April 2030 the Government will adjust the Triple Lock. We want to keep the core principles of ensuring a material rise every year, protecting against price increases, and ensuring that pensioners benefit as the economy grows - but to remove the permanent ratchet effect.

We achieve this with a State Pension that rises every year by at least the highest of inflation or 2.5%, plus anything more required to ensure the State Pension retains that 2029/30 record high value relative to earnings.

Sounds like the current Triple Lock - so surely this won’t save any money?

It absolutely will. The intuitive way to understand why is that our new approach from 2030 will see the State Pension put on a sustainable basis, rising in line with average earnings over time rather than consistently growing faster than wages.

The nominal savings are £15bn a year by 2040, rising to £50bn in 2050. Note the State Pension is still rising every year - the savings just reflect it rising at a slightly slower rate.

Is it a ‘Triple’ lock?

This has been the cause of the longest WhatsApp exchanges I have had, with podcasters, Today Programme presenters and the rest. Some have wrongly claimed the new policy is a double lock - to be fair largely because the earnings part of the adjusted Triple Lock isn’t the simplest bit of public policy ever. So here’s a graphic to ram home that the new policy is very much a triple lock.

If you don’t believe me, the Institute for Fiscal Studies put it best on their podcast: “It’s a triple lock - it has 3 elements - it’s a triple lock”.

What about pensioner poverty?

I regularly read people saying the Triple Lock has driven pensioner poverty down. But that’s wrong, as the timeline of pensioner poverty changes this century spells out.

Pensioner poverty halved under the last Labour government, as the creation of Pension Credit directly boosted the incomes of the poorest pensioners. But what happened under the following years of Conservative government (including with the Triple Lock in place from 2011)? Pensioner poverty actually rose by 350,000. What’s more, the post-2010 Conservative governments in practice paid for the Triple Lock with aggressive rises in the State Pension age, which bit hardest for those on the lowest incomes.

But enough about the past, what matters is the future. Here I have good news that I don’t think is widely known. Claims by some that adjusting the Triple Lock will see pensioner poverty rise in the 2030s and beyond are very wide of the mark. Partly that’s because the Pension will keep rising every single year. But more importantly it’s because DWP projections show that pensioner poverty is actually set to fall under our plans. Why? Because the move to a flat rate new State Pension from 2016, and the success of auto-enrolment in ensuring far more people have some private pension savings, is pushing up the incomes of poorer pensioners (disproportionally women) over time.

A line on a chart is of course no grounds for complacency, which is why I’ve also asked the Pensions Commission to include suggestions for further supporting lower income pensioners in their final report due early in 2027.

What about the politics?

This is obviously a big change to a popular policy, so the politics does matter. People want older generations to be supported. Everyone does - the young and those of us self-defining as middle aged, as much as pensioners themselves. But everyone also knows what is the biggest betrayal of older generations: our collapsing social care system, and that means for the NHS itself. What they have seen this week is that they have a PM who is as disgusted with the status quo as they are.

People rightly do want to see the State Pension keep rising - not least to protect against a rising cost of living and share in the benefits of a growing economy. And they will get that under our plans. But they also want a State Pension that they can trust will be there for them, and that they won’t have to wait into their 70s to receive. State Pension spending is projected to rise from c.5% to c.9% of GDP by 2075-76, with around half of that rise driven by an unreformed Triple Lock. By way of comparison, other welfare spend is projected to grow from 6.1% in 2025-26 to 6.4% GDP in 2075-76.

It is good politics to put the State Pension on a sustainable basis so we can rebuild people’s faith that it will be there for them in the decades to come. When our opponents say they will keep the status quo unchanged, the public know they are lying - or at least saying something they don’t believe. What did the new Shadow Foreign Secretary call an unreformed triple lock? “A Ponzi scheme”. Nigel Farage said the State Pension is “unaffordable on a national level” and Richard Tice said of the Triple Lock that “in the medium to long term, it’s unsustainable”.

The truth is those opposing our plans would in reality be putting the actual universal State Pension itself at risk. They will end up means-testing it (as Kemi Badenoch called for in January 2025) or scrapping it (as Reform’s favourite think tank campaigns for). Or they’ll make ordinary workers wait into their 70s for their pension - repeating the rapid increases in the State Pension age of the last Conservative government.

What has been set out this week is a new settlement, a better deal, for older generations. Not only ensuring they can keep a rising State Pension but offering something new: the National Care Service we will build. Free personal care for the elderly, delivered on NHS principles, giving people peace of mind and helping protect their savings and homes. This new settlement is something far more important than good politics: it’s the right thing to do.

Learning about pensions is a bit like going to the gym: you know you should do it, you feel guilty for not doing it, but you’re just not sure where to begin. To help, it was Pensions Awareness Week was last week, which does a good job of encouraging conversations. But it’s my job as the Pensions Minister to make sure the pension chats continue year round – and for that matter pensions charts. There’ll be lots more such charts to come (to make up for the fact that I have never exercised in a gym), but I thought we’d start with two big, stylised facts that everyone should know about UK pensions.

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Fact One: We’re back saving, but not saving enough

There has been good news in pensions-land in recent years. Back in the 2000s, workplace pension saving was collapsing as Defined Benefit pensions schemes closed at pace. But the roll out of automatic enrolment, proposed under the last Labour government and implemented from 2012 by the Coalition, has resolved the existential question: workplace pension saving has been resurrected. Ensuring most employees are enrolled into a pension unless they choose to opt out has been more successful than anyone predicted, with record numbers of employees – nine in ten of those eligible – now saving into a private pension, up from just 55% in 2012. That’s a huge achievement because the UK system has always rested on two pillars: a strong state pension that is the foundation of almost everyone’s retirement, but with individuals saving to build on it.

We need to celebrate this progress, but not be complacent. Why? Because the blunt truth is that collectively we are not saving enough to ensure that today’s workers, tomorrow’s pensioners, have a comfortable retirement. Here’s the first fact I promised: currently we’re on track for those retiring in 2050 to have private pension incomes that are 8% lower than people retiring today. In an ageing society - the number of people aged over 75 is set to double between now and 2075 - that is simply not what progress is supposed to look like.

This partly reflects that the minimum automatic enrolment savings rates (5% from the employee, 3% from the employer – both relieved of income tax on earnings between £6,240 and £50,270) were never intended to be enough for everyone when they were chosen in the 2000s. But it’s also because almost half (45%) of working age adults aren’t saving into a pension. Crucially, around half of those not saving are actually working. This includes the vast majority of the self-employed, who weren’t covered by automatic enrolment. Only 4% of those who’s income is entirely from self-employment are saving into a pension, so we must do more to help them prepare for retirement.

Fact Two: It pays to save.

It almost always pays to save into a pension. The next chart spells that out from the perspective of an average earners saving over their working life. The headline is stark: for every £1 the worker saves they get £4 back in retirement (that’s around £8 before we take inflation into account). Why? You save £1, the taxman puts in 25p in tax relief and the employer contributes at least 75p. And then the important part kicks in: your pension pot doesn’t just sit there, it is invested, grows, and grows further as investment returns on those previous returns build up over the years. Compound interest is a wonderful thing. In fact a key thing to understand is that investment returns make up the MAJORITY of your pension pot if you save steadily over time – perhaps two-thirds for an average earner. Maybe the language of having to build up a ‘pension pot’ yourself isn’t that helpful, because what makes a comfortable retirement possible is the fact that the process is actually more like baking a cake: what you take out of the oven is far more than the sum of the parts that went into it.

The point of spelling out these two key facts – that we collectively aren’t saving enough but that it very much pays to save, isn’t to lecture individuals. Retirement can feel a long way away, and the pressures many families face with the cost of living are real. But a small increase in saving now can make a big difference over time, and delivering comfortable retirements for today’s private sector workers isn’t down to individuals. The independent Pensions Commission (the same body that originally designed automatic enrolment) is currently investigating the scale of the undersaving problem and, more importantly, what should be done about it. They will report early next year and we’ll act on their findings. Retirement – ordinary workers being able to enjoy a period of rest after a lifetime of work – was one of the most important wins of the 20^th Century. Making sure that promise holds for today’s workers, and tomorrow’s pensioners, is the goal – a goal it’s eminently possible we can meet.

A regular question I get at public events is, why should we care? “This isn’t my GDP” is a common view. Or, moving from the agnostic to the antagonistic, “isn’t growth the problem”? These questions get at important truths – there have been times when economies have grown but wages have not. And clearly some routes to growth can be very bad indeed for the planet (the numpties should stop bitcoin mining). But what does the big picture tell us about the link between GDP and things we care about? Well the UK recent history tells us that the lack of growth (specifically productivity growth) was the single biggest driver of the wage stagnation that hammered ordinary workers. It was all of our GDP that went missing, so I for one am very glad to see some growth turning up.

Some will say there’s more to life than pounds and pence of wages (although that’s a lot easier for those with lots of pounds and pence to say). I agree there are strong arguments for focusing policy on our ultimate objectives of human happiness or wellbeing (on which note I had an excellent meeting last week with the Wellbeing Economics Parliamentary group – chaired by former Cabinet Secretary Gus O’Donnell and Peter Lamb MP). So what do we see on this front? That growth is part of the answer. If we look at specific countries, citizens’ happiness tends to increase as GDP/capita grows. And if we look across countries, citizens are happier in richer places. Here’s a chart from a recent paper by American labour economist Betsey Stevenson spelling out that second stylised fact.

As a small technical aside, the chart above is showing a linear relationship between wellbeing and the log of GDP/capita. Without going into the maths, this is telling us something intuitive: each additional pound delivers a smaller increase in life satisfaction. We see the same pattern within countries – life satisfaction rises with income but at a declining rate. This is the wellbeing based argument for redistribution: £1 matters more to the happiness of someone living on £10k much more than it does for someone earning £100k.

Now I said growth is part of the answer. Firstly that’s because other things really affect life satisfaction – how healthy we, and our relationships, are in particular. That is why we should rescue the NHS, talk a lot more about the rise in loneliness, and all get out of our homes more. Secondly, it’s because there are other measures of wellbeing beyond the hedonistic metrics of life satisfaction or happiness. Stevenson’s paper shows that if we look at people’s sense of purpose or meaning, that tends to actually be lower in wealthier nations.

Now, the degrowthers amongst you shouldn’t get too excited at this point, because this isn’t the slam dunk for your cause you might think. The negative relationship between purpose and GDP/capita isn’t driven by the direct impact of wealth rising, but instead by something that tends to come alongside countries becoming richer: less god. Believing in a higher power gives you a higher purpose. This reminded me of one of the most striking research findings back during my Resolution Foundation days. We looked at life satisfaction for people doing different jobs. In general those doing jobs that paid more were happier – but who has the highest life satisfaction despite earning relatively little? Clergy. Who has high life satisfaction amongst higher earners? Air traffic controllers, though probably not this week.

It might seem odd for life satisfaction and life purpose to move in different directions – and it is a bit of a challenge for those of us heavily invested in protestant work ethic vibes. But this isn’t the only place we see this divergence. Most memorably, research (and life experience) confirms a similar pattern… when you have kids. Having your first child drives down your life satisfaction, particularly for women. No sleep will do that. But, people’s sense of purpose does the opposite, rising as space for existential angst is squeezed out by the rather clear purpose of looking after another human being. The takeaway? Maybe the sweet spot to raise both life satisfaction and purpose is to boost both GDP and… fertility.

Have a great week everyone.

Now, fiscal chat does not make you friends at parties (at least not good ones). But there’s no drinks or canapes in sight, so let’s see how this goes, because fiscal chat – and more importantly fiscal substance – matters. That’s always true, but all the more so in the unstable world that the 2020s has turned out to be, most recently with global borrowing costs rising on the back of the Iran conflict (the simple version is Iran conflict = ↑inflation = ↑interest rates, including on government debt).

So far so factual – the question is what all this makes us think. And do. What this government is doing is putting Britain’s fiscal house in order. And when I say that I mean actually doing so rather than talking about it. Here’s a few different ways to understand what is going on.

Let’s look at the post-pandemic years from 2022 and focus on headline borrowing levels. What you see is that our predecessors were painfully comfortable to borrow year on year at well above normal levels. Just pause on the fact that national insurance cuts totalling £20bn a year were delivered in the final years of the last Parliament while the deficit was left sitting at 5 per cent of GDP (in each of those years the previous government said it would reduce borrowing and then comprehensively failed to do so).

What has happened since? Last financial year the UK cut its borrowing by a full 1 percentage point of GDP – that might not be top of most news reports, but it happened. Borrowing is set to fall again this financial year. This partly reflects a growing economy, with the fastest growth across the G7 in the first half of 2026. But I am not hiding from the fact that the steps, including tax rises, that have delivered those cuts in borrowing (and for that matter cuts in NHS waiting lists) have real impacts. However don’t believe anyone who pretends to care about the public finances while opposing every tax rise that cutting those waiting lists and borrowing levels has required.

Let’s take a different perspective and look at how the UK’s approach compares internationally, in the case of the next chart vs the rest of the G7. Under the last government, the UK borrowed more than the G7 average in every one of those 14 years. This year? The UK will borrow less.

Our last chart brings together this international angle and the reality that in the UK we aren’t just talking about cutting the deficit, we have already done so. Looking beneath the G7 average to individual countries spells out that the UK is delivering a faster fiscal consolidation than any other G7 economy between 2025 and 2030 (it is also the largest reduction in borrowing of any G20 country in case you prefer that rather more inclusive grouping). Today a very different kind of UK fiscal exceptionalism is on display from that trumpeted by Liz Truss.

And by splitting that period into the early and later parts of that period you can see that the era of UK governments promising to be chaste but not just yet has been brought to a badly needed close.

There will be some that say why do we need to reduce borrowing or that it isn’t a progressive cause. The economist answer is that we inherited high deficit and debt levels, which cannot be wished away. The Labour answer is there nothing progressive about already spending one in every £10 of taxpayers’ money on debt interest, money that could be spent in schools and hospitals. The job of a good social democrat government in these circumstances is to not only invest in public services but put the public finances on a more sustainable footing. And it’s time to remind people even more clearly that this is exactly what we are doing.

More positively, after two years in the world of politics, the summer gave me a chance to reflect on what supports, and what holds back, progress. Given there are lots of genuine challenges facing Britain, I’ve been shocked by how often political debates flounder, not because they (rightly) involve people disagreeing about policy prescriptions, but because they are premised on the wrong problem statement. Optimism bias is always dangerous, but so is blanket negativity. The latter prevents a prioritisation that puts real problems top of the to-do list, and feeds the nihilism that so-called populists use to claim that mainstream democratic politics can’t deliver the change we need.

Now, that badly needed change isn’t another Substack… but I thought a short and sharp newsletter each week, sharing at least one chart that tells you something important about the trends shaping modern Britain, the choices ahead, and the thinking we’re doing in Government wouldn’t hurt. The goal isn’t to pretend everything is going swimmingly but to encourage us to see more of the light and shade, to prioritise the real problems over the fabricated. Here are two charts to get us started on the state of the UK’s labour market.

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Labouring over the labour market

Having a secure job that pays a decent wage is foundational to most people’s idea of a good life. That’s why I’ve never been a supporter of those who favour some kind of post-jobs, UBI (or AI) fuelled future. So recognising challenges in our labour market is always worth doing.

Now you’ll have been told that the big problem is that NO-ONE is working these days. So our very first chart is just to show quite what garbage that is. To prove the point, here’s a fact that I’m prepared to bet you’ve never heard before: a higher proportion of Brits (three quarters of us) were working last year than in all but two of the last 100 years (leaving aside WW2 – huge wars tend to drive full employment). This is true despite a genuine cooling in the labour market since 2022 (vacancies fell back materially between 2022 and mid-2025 – yes continuing through the election for those fearing a propaganda newsletter).

The UK doesn’t have high employment just in historical terms, the same is true internationally. In the 1990s the US was held up as the poster child for a job-creating machine – but has never in its history had an employment rate as high as that seen in the UK today. There have been challenges with the ONS labour market data in recent years, but the headline employment rate statistic today reflects (far too belated) improvements in survey response rates that should give us grounds for confidence when comparing it in big picture terms to earlier decades.

This is an argument for accuracy, not complacency, about our labour market. The danger as always of pointing to the wrong problem is two-fold. Firstly, opportunists use it to argue for misplaced policy prescriptions (remember the 2010-15 Coalition’s attempt to make it easier to fire workers ‘unfairly’?) Second, you miss the real problem. And there is a real problem in our labour market that has been building since the 2000s: the prospects of younger generations.

The real problem

Youth employment rates never recovered during the 2010s to the highs seen when Tony Blair was Prime Minister – the employment rate for 18-24 year olds peaked under the last Conservative government at 63.5%, far short of the 68% seen in the early 2000s. Worse, post-pandemic we saw youth employment fall again, from 63% in 2022 to around 59% at the time of the 2024 election (it stands at 59.1% today). That 2022-2024 phase is also when we saw the surge in NEET numbers that new ONS data last week confirmed has left us with the disaster of nearly 1 in 8 young people not participating in education, employment or training.

This is the problem in our labour market that needs fixing, and understanding its timing is important to pinpointing its causes that are so damagingly interrupting successful school to work transitions for our young people. Those causes include too few high quality routes from the classroom to the workplace (including a 40% fall in youth apprenticeships in England over the past decade) and a dysfunctional benefits system (that labels far too many unable to participate, and then provides zero support to do so). There is also a sectoral story – while retail sales have been growing strongly in recent years our hospitality sector, a key employer for young people, has been having a much tougher time.

Changing the course

What are we doing about this? Our Jobs Guarantee to prevent long term unemployment is being rolled out, with the first young people now starting work. As with so many policies in this area this is government and employers working hand in glove to deliver, which is why we are also directly supporting more firms to hire the next generation. The (English) apprenticeship system is also being returned to its key role: providing a route for young people into the world of work. Business rates are being cut for pubs. And we have started reforming the welfare system - including spelling out that people can try work without their incapacity benefits being removed. Britain owes its young people a much easier path to getting established in their adult lives. We have started the work of doing so, but there is lots, lots more to do. The final report of the Milburn Review will be a key milestone this Autumn.

This is a rather long first newsletter to get us going – I’ll generally be aiming for a single chart and some chat each week. I hope you find Charting the Course some combination of interesting and/or useful. Feel free to drop me an email with any thoughts/feedbacks/suggestions, and lets see where those take us. Thanks for reading.