Burnham promised to “bring back hope” when he replaced the unpopular Keir Starmer as Britain’s prime minister in July. His first budget will require a dose of luck, as well.

Burnham’s chancellor of the exchequer, John Healey, delivered the sort of spending plan he had promised: a do-no-harm budget that avoided broad tax hikes. Against the storm of rising inflation and energy costs, he gave households £4.1 billion ($5.46 billion) of “breathing space” on the cost-of-living, paid for by levies on savers, landlords and a temporary tax hike on banks.

Healey’s hour-long presentation in the House of Commons on Wednesday was enough to achieve the main goal of avoiding an adverse market reaction. Gilts posted their smallest move on a budget day since 2020, laying to rest the idea that Burnham’s government would challenge the bond market’s grip on fiscal policy.

But the budget leaves little room for error for a prime minister who ascended to power promising sweeping change from his more cautious predecessor. While Labour’s sharp bounce in polls has helped quiet dissent within the governing party, some members of Parliament have expressed concern that voters would grow impatient without bolder policies.

Britain’s finances also remain in a precarious place as US President Donald Trump’s war against Iran fuels a surge in energy prices and puts pressure on the Bank of England to raise interest rates at its meeting next week. The £14.5 billion fiscal buffer that Healey left the Treasury — down from £23.6 billion in the spring — would easily be engulfed in the worst-case scenario modeled by the Office for Budget Responsibility.

“He doesn’t have enough to survive one bad roll of the dice,” said Ruth Curtice, chief executive of the Resolution Foundation think tank.

The budget itself did little to “break with the direction of the past 40 years,” as Burnham had promised Labour’s annual conference in Liverpool last month. Instead, he and Healey have deferred many hard decisions to next year’s budget and the upcoming review of departmental spending.

They’ve promised the latter document will, among other things, explain how the government will reach its goal of increasing defense spending to 3% of economic output by 2030, compared 2.7% in 2027.

Those seeking details about Burnham’s biggest policy promises, such as building closer ties with the European Union, or creating a new national social care service, will have to wait for events like the upcoming summit in Brussels or the “10-year plan” the prime minister has promised to deliver before year-end.

Labour backbenchers told Bloomberg they believed the budget represented initial steps ahead of what they hoped would be bolder proposals.

Healey told Parliament the budget was intended to “steer us through the global economic storms today, to chart a new course for Britain in the years ahead, to give people fresh hope for Britain’s future.”On the narrow goal of demonstrating stability, he could claim success. The FTSE 100 share index edged higher on Wednesday, helped by a lower-than-expected bank tax and the hint of favorable energy reforms, including the potential development of the Rosebank oil field in the North Sea. The government’s tax revenue assumptions capture “new fields, which includes Rosebank, and from future discoveries,” the OBR said.

Healey’s safety-first approach reflected a challenging backdrop. Growth over the five-year forecast was largely unchanged, but downgraded sharply next year when the energy crisis is expected to bite. The war in the Middle East was the most important factor for the OBR, driving up debt and borrowing as the government tries to cushion the blow from high energy costs.

The budget watchdog projected that both the deficit and debt would be higher in every year of the forecast than it had anticipated in March. Healey will need to borrow an extra £65 billion across the five years to 2030-31.

Healey said the budget was “for the working people of Britain” ahead of another difficult winter. To help with rising living costs, he extended the VAT cut on electricity bills to July next year and unveiled a £100 rebate targeted at 20 million households living in less valuable homes.

Amounting together to roughly £150, the support “spread the jam thin” compared with the anticipated £400 rise in a typical energy bill, Curtice said. The policies aimed at households would shave only 0.1% off inflation next year, according to OBR estimates, when prices are expected to increase by 3.4%.

The OBR’s forecasts may have also played down the extent to which energy prices rise. The fiscal watchdog’s projections were based on an estimate that the household energy price cap rises just 9% in January. Bloomberg Economics has estimates a 27% increase.

“By playing it safe, Healey may have avoided any flare-up in the bond market,” said Dan Hanson, Bloomberg’s chief UK economist. “But that will make the budget a hard political sell — the policy package does nothing for growth and nothing to bring down inflation. What’s worse, the cost of living squeeze is already more intense than the OBR is anticipating.”Under the OBR’s higher energy-price scenario, the chancellor’s headroom falls to £11 billion and government departments need £12.1 billion of spending top-ups, the watchdog said. Burnham faces the prospect of exactly that as the US plans fresh strikes on Iran.

With little fiscal firepower, Healey could do little to fight what he described as the “global economic storms.”Living standards, as measured by real household disposable income per person, will decline next year and in 2027-28, the OBR said.

At the end of the decade, households will be just 1% better off than they were in 2019-20, on the eve of the pandemic. The Joseph Rowntree Foundation has warned the current Parliament could see the worst fall in living standards on record.

Although Healey committed to raising defense spending to 3% of GDP by 2030, he didn’t explain how the £11 billion would be funded. Only a few months ago, his decision to quit as defense secretary over a failure to fund the increase helped bring down former Starmer as Labour leader.

Welfare spending, a fraught issue for the Labour Party, is due to rise even faster than previously thought to £413 billion in 2030-31, £6.2 billion more than expected in the March forecast. The most controversial element of that, health and disability spending, rises to £114.8 billion, £5 billion more than the OBR’s last estimate.

The budget didn’t detail anything on Burnham’s interventionist vision of “public control,” and an overhaul of the energy system to bring down bills will be part of Burnham’s forthcoming 10-year plan, Healey said.

Among the main revenue raisers were a 2 percentage-point increase on income tax from property and savings, hitting landlords and savers, which is meant to generate around £1 billion a year. A doubling of the bank surcharge to 6% nets another £1 billion in 2027-28, but the hike was less than expected and is meant to be withdrawn in 2029. Foreign sovereign wealth funds that were exempt from tax on rental income now face a 15% tax, raising £700 million by 2029-30.

Institute for Fiscal Studies Director Helen Miller described the budget as “a raft of fiddly measures, but very little that will move the dial on growth.”Tight spending plans in later years looked unlikely to be delivered and could be appeared be an “Achilles heel.”