There are U-turns, and then there is John Healey.

Eleven weeks ago Healey resigned as Defence Secretary because the Treasury would not fund defence at the level he said the country needed. On Friday, now Chancellor, he confirmed his own first Budget won't set a date for reaching 3% of GDP on defence either. That call has been pushed into next year's Spending Review (see The Big Story). What has changed, apparently, is the chair he is sitting in.

This was also a significant week for GBTT. We announced the founding members of our Academic Advisory Council: Luke Johnson, Dr David Starkey, Prof James Tooley, Marcus Ashworth and Izabella Kaminska — five serious figures from business, markets, academia, journalism and public life who will challenge our work as we grow. We introduce them properly below.

Politically, Burnham is still bouncing. Labour may not be. YouGov had Labour two points ahead of Reform earlier this month; its latest poll has Reform one point back in front, while Burnham himself holds a net +13 favourability rating — the best for a Prime Minister since May 2020. The honeymoon with the man is proving stronger than the honeymoon with the party.

Lord O'Neill has warned Burnham against a possible capital-gains-tax raid, calling the idea “stupid”, amid reports the Chancellor's fiscal headroom has already shrunk sharply since the spring forecast. Kemi Badenoch, meanwhile, is expected to reshuffle her Shadow Cabinet as Parliament returns; Mel Stride has faced persistent reshuffle speculation, though the latest briefing suggests he may survive. Did James Cleverly, who just quit the shadow cabinet to fight to become the next London mayor, know something?

Elsewhere, NEETs slipped back below one million without giving anyone much reason to celebrate, and Tuesday brings July's money-supply figures, alongside mortgage approvals and consumer credit.

Westminster returns from its summer break on Tuesday. Conference season starts too, with Reform heading to Birmingham from Thursday. As I write, The Telegraph reports that John Healey is considering windfall taxes on banks and oil companies in his first Budget — another raid on investment is an odd prescription for an economy desperate for growth. Meanwhile, Kemi Badenoch has asked the Cabinet Secretary to begin formal pre-election talks with the Conservatives, arguing that Andy Burnham may go to the country early. Westminster has barely returned and already the possibility of another general election is being taken seriously. Talk in the GBTT office suggests a General Election as early as 17 December.

And, after several weeks in which Britain appeared to have quietly abolished rain, that has finally returned too. Oh, and apparently Gen Z is almost twice as likely to pull a sickie as the over-55s. Quell surprise.

A quiet August this was not.

Introducing GBTT's Founding Academic Advisory Council

Five serious figures from business, markets, academia and public life have agreed to help challenge and strengthen GBTT's work.

This week marked a genuine step up for GBTT: the launch of the founding membership of our Academic Advisory Council. “Its purpose is not to manufacture consensus, but to bring serious experience, scrutiny and intellectual challenge” to our work. Members serve independently; nothing here implies any of them endorses a specific GBTT publication or position.

This is the founding cohort; GBTT expects to add further members as it grows.

From Resignation to Retreat. Healey’s Defence U-Turn.

Eleven weeks ago John Healey resigned as Defence Secretary because the government would not commit to a credible path to 3% of GDP on defence. On Friday, as Chancellor, he confirmed his own Budget will not set a date for it either.

Healey resigned as Defence Secretary in June, refusing to accept a settlement that fell, in his own words, well short of what Britain required — the dispute was over a credible path to 3% of GDP on defence. He is now Chancellor, and confirmed Friday his own first Budget, on 28 October, won't set a timetable for reaching that same 3%; the decision goes to next year's spending review instead, with defence spending on course for just 2.7% of GDP by 2030.

The explanation offered is fiscal discipline: a funding gap already built into defence, borrowing costs still high, and little room inside the rules Healey inherited. All of that was true in June as well. What has changed is which side of the table he is sitting on.

Robert Jenrick called it an act of breathtaking shamelessness, and an absolute screecher, as far as U-turns go. He has a point.

The Budget arithmetic is getting harder elsewhere too. Reporting citing Home Office and IFS analysis this week put a number on a second, partly self-inflicted squeeze: a slowing migration rate, partly reflecting tighter skilled-worker, study and family visa rules, could cost up to £4bn of the headroom Healey needs, because the OBR's growth forecasts still assume a workforce expanding through immigration. Fewer migrants generally means lower aggregate GDP than otherwise — it does not mean poorer Britons, since GDP per head, not headcount, measures living standards. If lower migration breaks the fiscal rules, the rules were the problem, not the migrants.

The Dash for Data

Global electricity use: countries, data centres and EVs.

Gas Drives The Rise; The VAT Cut Cushions It

Ofgem confirmed Wednesday the default tariff cap will rise 4% from 1 October, to £1,723 for a typical dual-fuel household on direct debit. The driver is wholesale energy costs, up 11% over three months as the Middle East conflict keeps gas markets on edge. Gas bills alone are rising 8%; electricity is holding flat only because the Government has stripped VAT off domestic electricity from 1 October, worth about £45 a household. About 11 million households on fixed tariffs are unaffected by the cap rise, though they still get the VAT cut. Ofgem's own comparison puts the new cap 52% — £1,859 — below the unsubsidised cap at the height of the 2022 crisis, a different reference point from the £2,500 Energy Price Guarantee households actually paid. Set against last year, the new cap is still 7% higher once inflation is stripped out.

The Next BoE Move Just Got Pushed Into 2027

Markets had already pushed back their bet on the next Bank of England move, from late this year to early 2027, before Kevin Warsh added another reason: in his first Jackson Hole speech as Fed chair, he said progress against US inflation had been modest, with work still to do. That lifted the dollar broadly; sterling closed at $1.353, its weakest since 19 August. Governor Andrew Bailey struck a calmer note: the UK has seen only subdued knock-on effects from higher energy costs, he said, pointing to a labour market too soft to give workers bargaining power on pay. Most economists still expect the Bank to hold at 3.75% on 17 September.

NEETs Fall Below One Million — But The Structural Problem Remains

ONS figures published Thursday show 981,000 16-to-24-year-olds were NEET in the three months to June, down 30,000 on the quarter and back below the one-million mark breached in Q1. Take the win, but not too seriously. The rate fell to 13.0% from 13.5%, but that is still above the 12.8% recorded a year ago, and economic inactivity, not unemployment, accounts for 60% of the total — 588,000 young people not in work and not actively seeking it. A youth labour market that sheds 30,000 NEETs in one quarter after adding 55,000 the last isn't stabilising. It's drifting, and the broader direction is still up.

The ONS's Household Costs Indices, also out this week, show costs up 2.8% in the year to June against a headline CPI of 2.6%. CPI measures price changes using expenditure weights across the economy; the HCI shows how those changes are actually experienced by different household groups, and includes costs such as mortgage interest that CPI excludes — which is why private renters face 3.0% and outright owners only 2.6% on the same headline month.

From GBTT And Its Advisory Council This Week

Damian On The Mike Graham Show: “There will be a revolution.”

Next Week's Trouble