John Healey takes office as chancellor this Wednesday facing an economic paradox: while global markets reel from the Middle East conflict and energy prices surge toward £2,000 annually for typical households, the most urgent crisis may not be cyclical but structural. Britain is the most centralised G7 country for tax and spending policy, and among the most economically unequal. This isn't just unfair—it's economically wasteful, and Healey's budget must prove the government is serious about fixing it.
The government's devolution strategy offers genuine promise. Plans to let local leaders retain a share of income tax, combined with a new £1.5bn borrowing facility for directly elected mayors, could finally give regional economies the tools to compete. Yet these measures will fail without follow-through. When youth unemployment rates are significantly higher in Blackpool, Birmingham, and Bradford than in Bath, Harrogate, or Guildford, central solutions won't work. Andy Burnham's pledge of 'growth in every postcode' means nothing if London continues hoarding decision-making power.
The youth jobs crisis exemplifies why devolution matters. Nearly 1 million young people are not in education, employment, or training—a figure Burnham rightly called an 'economic catastrophe and a moral failure.' The government wisely plans to hand local leaders more power and money to support young people, recognizing that geography shapes opportunity. But this requires genuine fiscal devolution, not token gestures. If Healey allocates funds without devolving control, the postcode lottery will persist.
The chancellor faces real constraints. The Middle East conflict has likely halved his fiscal headroom to around £12bn, and bond investors will demand he retain at least £14bn to prevent market turbulence. Energy support costing more than £1bn and planned defence spending increases compound the pressure. Yet the long-term cost of inaction on regional inequality dwarfs these immediate pressures. The Resolution Foundation warns that falling net migration—down from nearly 1 million in 2023 to an expected 230,000 annually—could reduce tax receipts by £4.7bn by 2029-30. Regional stagnation will only accelerate emigration.
Healey must use this budget to prove devolution is real. The measures announced should transfer not just money but genuine autonomy to local leaders. Establish clear milestones for regional growth. Tie future central funding to devolved authorities' success in closing the inequality gap. This won't solve the youth crisis or Brexit's economic damage overnight, but it signals that Westminster finally understands: prosperity cannot flow indefinitely from the capital while the regions wither. That's not just morally indefensible—it's economically suicidal.