If Labour under Keir Starmer and Rachel Reeves was actually planning to hand over political power to the populist right in the shape of Nigel Farage at the next election, it couldn’t have done a better job than deliver a budget that inspires no one and will eventually leave many worse off.
As if to confirm that mainstream politicians always lie and fail to keep their promises, which feeds populism, chancellor Rachel Reeves abandoned a manifesto pledge about raising taxes – or rather, not increasing them – which was then followed by the decision to drop a pledge to give workers a right to claim unfair dismissal from day one of their employment.
Some commentators described it as a “playing for time” budget, giving Starmer’s government a breathing space while it comes up with something better. Actually, the budget was primarily aimed at the financial markets who fund government borrowing through what is known as bond markets.
Even that form of appeasement failed. When the markets digested the half-baked budget, they realised that delay was the name of the game. Initially, the markets reduced the interest rates on UK government bonds – only to raise them again after 24 hours! The bill, naturally, falls on the taxpayer or takes the shape of spending cuts. The freezing of income thresholds will push an extra 780,000 people from the poorest sections of society into paying tax.
Meanwhile, unemployment continues to rise, and is now standing at 5%. Food inflation in October 2025 was 4.9% on a year ago, leaving many households dependent on food banks. Energy prices remain 50% higher than they were before the Russian invasion of Ukraine in 2022.
The Joseph Rowntree Foundation estimates that the average household will be £850 worse off over the course of the parliament, despite the ending of the two-child benefit limit introduced to show the markets how tough Reeves could be!
Local councils – many of whom face bankruptcy despite selling off assets as fast as possible – are unhappy that budgets for next year will be just as challenging. A briefing from the Local Government Association said “we are anxious that the Budget does not provide the level of funding councils urgently need to ensure their financial sustainability, protect services and support local communities”.
By all accounts, asset managers are already sending out lists of possible replacements for Starmer who would be best for the bond markets. As Aditya Chakrabortty, put it: “Rather more sobering is the implication that financial markets, while paying no party subs and wielding no votes, will have a say in choosing this country’s next prime minister.”
Which is exactly the way things are, Aditya! The relationship between political and economic power has shifted fundamentally in favour of the corporations and financial markets. This happened over 20 years ago, resulting in the switch to neoliberal policies by politicians, the capitalist state and executives alike.
This process is what lies at the heart of the ongoing crisis of representative democracy and the rise of populist parties and governments across the world. As the global economy slips into trade wars, with “growth” at a premium and debt levels indicating a new financial meltdown, governments often seem paralysed. Starmer’s outfit is a case in point.
Parliamentary politics has run out of reformist road and in the UK as elsewhere is threatened by populism and autocracy. Labour is doing its best to outflank Reform by demonising migrants and extending the label “terrorist” to protest groups like Palestine Action while saying nothing about genocide in Gaza. It’s pathetic to watch.
In summary, this is an historic whole system crisis, both political and economic at the same time, which can’t and won’t be resolved simply by voting this way or that. It’s about power – who has it and who doesn’t. Clearly, the vast majority are powerless when it comes to which direction society should move in.
While we must defend parliament and our rights against the threat from the far right, this approach has to go hand-in-hand with creating a real democracy through assemblies and other bodies to start the process of transferring power to the people. As 2026 looms, that’s the perspective for the coming year.