Public sector growth: how the Prime Minister can act fast

The early moves are telling. Removing VAT from domestic electricity bills from 1 October and restoring the £2 bus fare cap are fast, simple and felt directly in people's pockets. Both come straight from the Greater Manchester playbook: public service interventions as cost-of-living policy. Challenging every department to bring forward its own measures signals a whole-of-government expectation, not a Treasury set-piece. 

The Cabinet tells us more. John Healey's move from Defence to the Treasury points in two directions at once. First, defence investment stays central: a Chancellor who publicly pressed for greater defence funding is unlikely to let the Defence Investment Plan drift. Second, hints at appetite to reform how the Treasury works. Burnham has long argued, including in Head North, that appraisal models undervalue places outside London and the South East. A refreshed Green Book that favours intervention and place would be entirely consistent with "good growth in every postcode". 

So where can government make an early impact? Our verdict: the biggest constraint is rarely the absence of programmes. It's pace. 

Accelerate what's already working 

Government has established programmes to support growth and improve public services, but layered oversight and stop-start funding decisions have too often slowed delivery. Trusting departments and places to move faster, within clear guardrails, would deliver more than any new initiative. 

Back the dynamism in the defence sector 

The UK's defence start-ups and mid-sized businesses are among the most dynamic in the economy: developing cutting-edge capability in autonomous systems, AI, space, cyber and advanced manufacturing, much of it dual-use technology with civilian markets too. Our work supporting the development of the UK's defence supply chain shows the appetite: growth businesses in every region, ready to invest and scale. Investment here serves multiple purposes at once: meeting the global security challenges facing the UK, delivering on our international commitments to increase defence spending, and driving growth in every part of the country. With a Chancellor who championed defence investment, the conditions are there to treat defence spending as growth policy — the task now is to convert that intent into investment on the ground. 

Use the levers already in hand 

The new Growth and Skills Levy is a prime example. Substantial levy funds have expired unused in recent years, while employers (including government departments and public sector bodies) can now transfer up to half their unspent funds to other businesses, including their supply chains. Applied creatively, that could channel skills investment directly into the growth sectors, from defence to health and care, that need it most. Local government reorganisation and deeper devolution, already underway, give places the institutions to act, if the funding and freedoms follow. 

None of this wishes away the hard problems. Social care remains unreformed and underfunded, and the pressures on council finances, the NHS and household budgets have not gone anywhere. These will need answers, and money, at the Budget. But the fiscal rules allow borrowing for investment, and the sharper question is whether government can convert commitments into delivery quickly enough for people to feel the difference. Breathing space bought the new Prime Minister attention. Pace of delivery will decide whether it buys him trust. 

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