As the Government prepares for a landmark Autumn Budget, the Work Foundation at Lancaster University hosted an online event to review the latest labour market and inflation statistics and discuss whether the fiscal statement could kick start economic and labour market renewal.

Having seemingly stepped back from a manifesto-busting decision to raise general taxation, the Chancellor’s choices will be influenced by political and economic uncertainty, as well as well as persistent pressure on the public finances. In a rare piece of positive news, on the morning of the event inflation fell to 3.6%, but a recent IMF report suggested that UK workers are due to face the highest level of inflation in the G7 over the coming years.

Ben Harrison (Director of the Work Foundation) chaired the conversation and was joined by Suren Thiru (Economics Director at the professional body, ICAEW), Helen Barnard (Director of Policy, Research and Impact, Trussell) and Duncan Weldon (economist, author and broadcaster).

A stable but sluggish economy with living standards suffering

When you strip back all the excitable media headlines, the British economy has been relatively stable in recent years. The issue, Duncan Weldon reflected, is that continuous “sluggish growth” of about just over one per cent per year has impacted the economy for over a decade. It was also important to acknowledge, he added, that the Government’s fiscal issues have been compounded by the OBR’s downgraded assessment of UK productivity that will create a £20-25 billion hole in the budget.

In addition, panellists believed that last year’s Budget continued to cast a long shadow over the economy. Suren Thiru argued that the increase in employers’ National Insurance Contributions is having a real impact on the labour market and the wider economy, with payroll employment falling sharply and unemployment rising to 5%. Suren said, “Consumers and businesses are more cautious to spend and invest”.

“We're almost in the worst of all possible worlds at the moment”, Duncan stated. Reflecting on the average worker receiving relatively small real wage increases despite 4.6% nominal wage growth, he made the case that a “wedge” is opening up between the cost for employers hiring staff and the extent to which those staff feel better off.

The labour market is not yet in crisis and positive steps have been taken

Despite the glum economic picture, Helen Barnard stated that the “labour market is not in crisis”. Near historic high levels of employment show a jobs market that is functioning, but Helen suggested that there are two major problems. Firstly, for too many people, work isn't providing a reliable route out of poverty. Secondly, the labour market isn’t a very welcoming place for a lot of disabled people and carers – there are too many who can't access work at all and when people are in work, they are disproportionately likely to be stuck in low-paid work.

Panel members highlighted that the Government has made some positive steps forward on long-term issues such on reforms to provide workers security through employment rights and renter’s legislation. In addition, Helen highlighted smaller policy interventions the Government has announced that will support those struggling to pay the bills, such as expansion of free school meals, the warm home discount and tweaks to Universal Credit.

But speakers reflected that many of these measures will take time to pay dividends – either for individuals or for the economy. There was also concern that constant fiscal policy speculation over the last 16 months and policy missteps had created an air of instability. Helen emphasised that the decision to suddenly slash disability benefits earlier in 2025, before an eventual U-turn, did “a lot of damage to trust and relationships” at a time when Government had been developing more widely supported employment support reforms.

Will a ‘smorgasbord’ approach work as the Government faces pressure to deliver?

Although the Government have only been in power for 16 months, the Autumn Budget is likely to be pivotal to their ability to deliver on pledges to boost growth and fix the challenges facing the labour market. Panel members agreed that many of Government’s policies – such as the Youth Guarantee or the Industrial Strategy – would benefit from being boosted by additional funding, enabling them to be implemented more rapidly so that the impacts can be seen before the end of the Parliament.

As the event came to a close, there was agreement that due to political pressure the Chancellor was likely to take a cautious approach of a ‘smorgasbord’ of smaller tax rises, even if a rise in general taxation would provide more certainty for business and workers and would be less economically distortive. But Duncan and Suren called on the Government to make a better case for why the UK requires more fundamental tax reform in the future – both to simplify the regime facing businesses and generate more money to meet the Chancellor’s fiscal rules, invest in public services and the economy.

The last word for the event went to Helen Barnard who stated that the Chancellor must focus on the “millions of people who can't afford to put food on the table” – not only as a moral imperative, but recognising that the status quo is bad for the economy, and the country as a whole.

Watch the full discussion on YouTube.

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