Policy Landscape 2026

There is a general sense that Andy Burnham has got off to a decent start as Prime Minister, achieving some recovery in support for Labour in the polls. Initial announcements – notably on energy prices and bus fares – indicated a sensitivity to the importance of the cost of living for many voters, and a gift for effective communication that his predecessor conspicuously lacked. Equally, there is broad acknowledgement that this early success has been largely ‘vibes based’,  and that much more difficult decisions lie ahead. As we approach the autumn, with the war in Iran ongoing, the immediate pressures on the cost of living may  become more acute, while the fundamental challenge of reconciling low growth, high debt and poor public services has not gone away.
This report is an attempt to spell out some of the difficult choices and trade-offs that lie ahead, and that any serious ten-year plan would need to address. The  Resolution Foundation and UK in a Changing Europe have once more come together to assemble a group of leading experts to analyse the major challenges  confronting the UK government (in the case of devolved policy areas such as health and social care, housing and planning, and education, the analysis focuses on England).

As has been the case in all our recent reports, the economic context it describes is pretty grim. GDP per person is still broadly where it was in 2019 – had the pre-2008 trend continued, it would be 30% higher than it currently is. The labour market continues to weaken: unemployment rose from 4.1% to 4.9% between July 2024 and June 2026, and the number of 16-24 year-olds not in education, employment or training passed 1 million this spring, for the first time in more than a decade.

The fiscal situation provides further grounds for concern. Debt, and the cost of servicing it, are high by recent standards: £1 in every £12 of public spending  now goes on debt interest, and the government is borrowing around £115 billion – or 3.6% of national income – this year. In the short term, the plans  bequeathed by Rachel Reeves imply significant fiscal consolidation in the form of tax rises and cuts to departmental spending, backloaded towards the end of  this parliament.

As John Healey puts together his first Budget, the backdrop of bond market turmoil limits the room for manoeuvre. There is quite the irony to rumours that he won’t address the tangled issue of how and when to raise defence spending until next year, given it is the very issue over which he resigned as defence  secretary. On top of which, there are questions as to whether to provide greater cost of living support, and how to leave space to meet the Prime Minister’s many other ambitions – from social care to council house building.

On the former, if a comprehensive, NHS-style model is adopted for social care, the costs could run to some £18.5 billion by 2035-36. As for the latter, as Paul Cheshire points out, 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 behind the Prime Minister’s pledge to deliver the biggest council house-building programme since the Second World War.

With energy bills rising again this winter, the cost-of-living crisis is back centre stage. Overall prices are up a quarter since the invasion of Ukraine, but the cost of essentials, on which poorer families spend a larger share of their budget, has grown especially fast – food is up more than 30% and energy up 50%. It is global events that will most strongly determine their future path, and the UK remains vulnerable to a number of pressures over which the government  exercises precious little control.

The EU’s forthcoming ‘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 fresh threat.

All of this is in a context in which public services are coming under increased pressure. Richard Price outlines the challenges facing the criminal justice  system, with prisons, probation and the courts part of one interlinked crisis. A probation staffing gap of around 3,900 posts – roughly a quarter of what is needed – 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.

At the same time, the straitened fiscal environment makes it harder to address real problems with public services. Although 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, the settlement was below the long-run average for health spending and well below the 2000s Labour-era increases.

Key to addressing this is the need to increase productivity – not least, in the case of health, given the need to fund social care and the longer-term  demographic pressures that 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 – will themselves require sustained capital investment.

Finally, there is the agenda sketched out by the new Prime Minister himself, many aspects of which will pose significant challenges. 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, as Carole Willis points out, 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.

Of the new Prime Minister’s priorities, greater devolution – within England at least – is perhaps the most personal. As Sophie Hale points out, the UK has persistently high levels of inequality between places, with the 4.5-times gap in income between those in Leicester and those in Kensington & Chelsea barely moving in 30 years.  Part of the problem is that England is extremely fiscally centralised by international standards: just 4.8% of UK taxation is collected sub-nationally, the lowest share in the G7. Burnham’s solution looks set to include giving Mayors powers to retain a share of income tax and business rate  generated in their areas. But, as Andrew Carter says in his essay, there are big open questions about the capacity of strategic authorities, and about how to reconcile growth incentives with redistribution.

Many of the contributors stress the need for stable policy frameworks to address long-term problems effectively. As Jonathan Portes puts it, ‘the test of a growth strategy is not the scale of its announcements, but whether it sustains credible policies long enough for firms, workers and places to respond.’ Yet long-term solutions themselves depend on a relatively stable world and relatively stable politics – something that is far from assured in the fragmented political landscape described by Rob Ford. The 2024 general election, in which Labour won nearly two-thirds of seats on little more than a third of the vote, was the most disproportionate result in the country’s history, and further fragmentation looks more likely than less. It is conceivable that this landscape itself will shift, should the Prime Minister act on what has, to date, been his stated commitment to some form of electoral reform. But whether he does or not, polarised and adversarial politics – in which 67% of voters now see politicians as self-serving – will impede the kind of longer-term thinking that so many of the challenges we face require.

Then there is the inter-relationship of different policy areas. The health service reorganisation – including the abolition of NHS England, first announced last year – might have the effect of increasing ministerial control and reducing local autonomy, in stark contrast to the Prime Minister’s rhetoric about devolution. In addition, 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, as Peter Walsh and Ben Brindle note, 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.

While lots of these challenges are familiar, they take place against a shifting world order and a wave of technological transformation. The development and deployment of AI could ease some of these choices, be it through the drugs it invents or the information it democratises. But, as Will Moy, says “the future will be exciting. But it is an open question what kind of excitement we are in for”. We hope this collection helps guide you through the key choices determining that
future.