To mark the publication of the latest edition of the Policy Landscape 2026, Anand Menon and Ruth Curtice reflect on the key policy challenges confronting the UK.
Andy Burnham has got off to a decent start as Prime Minister. Yet this early success has been largely ‘vibes based’. To be credible, the Budget and the ten year plan coming this Autumn will have to face the much more difficult challenge of telling us how the Government will navigate the big trade-offs it will confront, challenges spelled out in detail in our new report.
Those challenges are many. Not merely sluggish growth – GDP per person is still broadly where it was in 2019 – but also a weakening labour market and a parlous fiscal situation exacerbated by recent bond market turmoil. In addition, there is the poor state of public services, the need to fund pre-existing pledges (notably on defence spending), the question as to whether to provide greater cost of living support, and (presumably) how to meet the Prime Minister’s many other ambitions – from social care to council house building.
On the former, the cost of a comprehensive, NHS-style model could run to some £18.5bn by 2035/36. As for the latter, only 1,970 council houses were built in 2025 – against the near-200,000 built annually in the early 1950s. Which gives some sense of the scale of the PMs pledge to deliver the biggest council house-building programme since the Second World War.
All of this is in a context in which public services confront a number of wicked problems. Criminal justice is a case in point. Prisons, probation and the courts form one interlinked crisis. A probation staffing gap means thinner supervision, more breaches of licence conditions and, for the first time on record, more prisoners recalled than released in a single quarter. Meanwhile, a Crown Court backlog of over 80,000 cases and a magistrates’ court backlog of over 370,000 are keeping more defendants on remand, compounding the pressure on prison places.
And of course, money to address these issues is in short supply. Health was the big winner in the 2025 Spending Review, with real-terms growth averaging 3% for day-to-day NHS spending up to 2028/29. Yet it’s worth bearing in mind that this settlement was below the long-run average for health spending and well below the 2000s Labour-era increases. The Spending Review coming in 2027 currently has much tighter growth rates, and 3% for health again would be hard to achieve without cuts elsewhere.
Absent significant funds, the key to improvement is increased productivity – not least given the need to fund social care and the longer-term demographic pressures. These latter will see health spending, according to OBR forecasts, account for 14.5% of GDP by the mid-2070s, up from 8.3% in 2022–23. Yet the necessary steps – the shift from analogue to digital, for instance – themselves require sustained capital investment.
And then there’s the new agenda sketched out by the Prime Minister himself. We are yet to see the details of the complete rethink of the education system that Mr Burnham has called for, involving the introduction of technical pathways for all young people from age 14 from September 2028. This raises enough questions in and of itself, including the relationship between education, skills and economic growth, and the balance between academic and technical education. But the Prime Minister’s initiative also raises questions about how it might interact with implementation of the Starmer-era Curriculum and Assessment Review and SEND reforms.
And of course, none of these policies exist in neat silos. The health service reorganisation – including the abolition of NHS England – might simply increase ministerial control and reduce local autonomy, in stark contrast to the Prime Minister’s rhetoric about devolution. As immigration numbers fall, the government will need to think about the implications for health and social care, where migrants have long been used to plug staff shortages. More broadly, falls in legal migration will weaken the government’s fiscal position, since the decline has come mainly from workers and students – the groups that make the most positive economic contribution.
It’s worth stressing too that Mr Burnham’s fate will depend partly on forces outside his control. The cost-of-living crisis has been driven by international factors. Overall prices are up a quarter since the invasion of Ukraine, and it is global events that will most strongly determine their future path. Meanwhile, the EU’s ‘Made in Europe’ local content rules – not aimed at the UK, but liable to catch British firms embedded in EU supply chains regardless – pose a further threat to exporters and hence to UK growth prospects.
Obviously no Government can tackle all of these issues at once. But we do not yet know which of the priorities will give if the money is not available to improve public services, reduce the cost of living and stick to the manifesto tax pledges. That is the question, in the end, that both the bond markets and the voters want to know the answer to.
The Prime Minister seems to be pinning his fate on his ability to show real progress on the cost of living and the state of public services before the next election. The spending plans bequeathed by Rachel Reeves – involving tax rises and spending cuts towards end of this parliament – provide a strong incentive to go to the people before July 2029. Time, then, is pressing if the Government really wants to deliver. It really needs to start spelling out how it intends to do so.
By Ruth Curtice, Chief Executive of the Resolution Foundation, and Anand Menon, Director of UK in a Changing Europe.
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