Rhetoric and reality: the economics of Reform

Good morning from New Economy Brief.

Earlier this year at the World Economic Forum, Reform UK’s leader Nigel Farage said the party should “challenge every single tenet” of UK economic policy. He also warned that a Reform government could abolish the OBR and limit the Bank of England’s independence.

Since then, however, Reform has sought to shore up its reputation for economic competence and has rowed back on some of its earlier ideas. Former senior Conservatives have defected, with ex-Cabinet minister Robert Jenrick appointed as Treasury spokesperson.

What does Reform’s economic platform look like now? This week’s bumper New Economy Brief digests what we know so far – and what happens when rhetoric meets the realities of governing.

‍

Tax cuts, at some point

A central offer in Reform’s 2024 manifesto was around £90bn of tax cuts: raising the inheritance tax threshold to £2m, lifting the personal allowance to £20,000 and the higher rate threshold to £70,000, cutting corporation tax to 15%, offering tax relief on private school fees and reducing fuel duty.

By early 2026, these have been downgraded to an “aspiration”. Reform is keen to calm financial markets about the risks of an untested party. Farage said last week that taxes would only be cut once spending savings are found, explicitly to avoid a repeat of the market turmoil triggered by the unfunded tax cuts in Liz Truss’s 2022 mini-budget. (Notably, the Reform-aligned Centre For A Better Britain think tank’s first paper was titled What to do if the UK faces a sovereign debt crisis.)

For example, tax cuts on pubs would be fully funded by welfare cuts. Reform proposes cutting beer duty and hospitality VAT by 10%, estimating a £3bn annual cost by 2029, funded by reinstating the two-child benefit limit (with exemptions for working UK-national parents). In short, it is under greater pressure to show its sums add up – though IPPR analysis warns the tax cuts would “dwarf” any savings.

‍

Spending cuts first, to build credibility

RUK’s national tax-cutting programme rests on the claim that large amounts of wasteful spending – on welfare, net zero and the civil service – can be cut. Farage has previously suggested £350bn of savings over a parliament, equivalent to eliminating the entire schools budget each year or roughly a third of NHS funding.

It makes headlines, but the rhetoric is likely to collide with the reality of a public sector that has struggled to deliver savings for 15 years, while still feeling threadbare.

Reform meets reality in local government. While untested nationally, Reform has pursued spending reductions in local government via its “Doge” cost-cutting units, inspired by Elon Musk’s Department for Government Efficiency in the US, aiming to cut ‘waste’ in Diversity, Equity and Inclusion and other so-called ‘woke agendas’.

The highest-profile case so far has been Kent County Council. Council member leader Paul Chamberlain admitted: “We made some assumptions that we would come in here and find some of the craziness that Doge found in America … and that was wrong.” Services had already been cut back heavily. 

Nevertheless, Reform claims more than £300m in savings have been found so far across 10 councils it controls – although the Guardian disputes this. Far from delivering the tax cuts they promise nationally, financial pressures have instead driven roughly £250m in council tax rises in Reform-run areas, alongside unpopular decisions, rows, resignations and U-turns, according to the FT’s Jennifer Williams. Reform-controlled councils will raise council tax by an average 4.3% in April.

The Institute for Government’s Stuart Hoddinott says the past nine months have been a reality check: “The whole story has been the populist rhetoric butting up against the reality” – namely that councils must raise tax to meet rising social care costs.

‍

A ‘Great Repeal Act’ to deregulate the economy and scrap net zero 

This tension between rhetoric and reality appears throughout Reform’s programme. More proposed savings come from reversing climate policy via a “Great Repeal Act” to scrap regulations that “kill jobs, hinder growth, investment and prosperity”.

The plan includes scrapping net zero targets and imposing a windfall tax on renewables. Reform also wants to expand public investment and ownership in nuclear, fracking and fossil fuels by consolidating public-sector pension schemes into a new Sovereign Wealth Fund. 

Reform plans to extend this deregulatory agenda to the housing and the labour markets by repealing the popular New Deal for Workers, the Renters Rights Act, and other financial and business regulations, arguing this will lower inflation and household bills.

Zooming in on climate policy. Reform claims scrapping net zero could raise £45bn–£225bn, though the higher figure is widely considered misleading because it counts private investment, and cancelling this doesn’t save the government money, according to the Institute for Government.

Lord Nick Stern has argued that climate action is the “only growth opportunity of the 21st century”; pursuing fossil-fuel-led growth instead is “futile because the damage it causes ends in self-destruction”.

Inaction costs far more than action.  Reform's planned savings from abandoning net zero also ignore the reality of huge long-term costs of inaction. Climate change could slash global economic output by a third to a half, with inflation spiking, productivity and whole industries collapsing as supply chains stretch and break.

 On energy specifically, NEF estimates that, if implemented in 2026, Reform’s proposed taxes on renewables, removal of subsidies and wider anti-environmental policies could cost the UK £92bn in lost revenue and eliminate more than 60,000 jobs by 2030.

‍

The tension between immigration plans and fiscal sustainability

Reform would abolish Indefinite Leave to Remain (ILR), which allows migrants to qualify for rights and access to benefits. It claims this would save £234bn over several decades, with policy chief Zia Yusuf asserting that many of those affected are “entirely dependent on the welfare state” and will either voluntarily leave the UK or be deported. 

Reform also plans an Illegal Migration (Mass Deportation) Bill to remove up to 600,000 irregular migrants by expanding detention capacity twelvefold and running daily chartered flights. It estimates a £10bn cost over five years but claims larger long-term savings from reduced asylum spending on hotels and elsewhere.

Lost income, lower labour supply, higher borrowing. This Guardian explainer questions the costings of Reform’s plan. But even if it could succeed operationally, there are wider economic impacts from reduced legal migration. 

Migrants fill one in five jobs, have higher employment rates, pay about £19,500 per adult annually in tax, generate £4.1bn a year in visa fees and are less likely to claim benefits. The OBR estimates that cutting net migration by 200,000 would reduce GDP by about 1.5% and increase borrowing by nearly £20bn within five years.

Lower migration typically means lower growth and so less fiscal headroom to tackle cost-of-living pressures or restore public services. As King’s College London Professor Jonathan Portes argues: “The risk is the emergence of a migration doom loop, in which political pressure to reduce migration leads to policy choices that weaken economic performance and public services, thereby intensifying the very discontent that fuels anti-immigration sentiment.” 

That is not to mention the moral and legal issues. Laura Smith of the Joint Council for the Welfare of Immigrants (JCWI) describes this as a “Rubicon moment,” arguing: “This isn’t about migration policy any more, it’s about whether we still value the basic human rights and freedoms that define a democratic society.”

Reform’s response: reform the OBR. Reform argues OBR forecasts fail to capture migrants’ long-term fiscal costs as they age, have children and draw pensions. Farage previously suggested abolishing the OBR, but in a bid to boost market credibility, Robert Jenrick has softened the position. Reform now says the OBR (like the Bank of England) would remain independent, but would be required to “open itself up to more outside, proven forecasting expertise” via a rotating expert panel to diversify views on the Budget Responsibility Committee. 

‍

Is this economic approach a winning formula?

Significant parts of Reform’s economic policy platform arguably resemble a typical pro-business, free-market approach. This is likely to lead to tensions amongst Reform’s current and target voter base, who hold a mixture of views about the economy. 

The party is moving towards a deregulatory agenda that weakens workers’ and renters’ rights, despite workplace and housing protections being popular with its own voter base and with the public as a whole. Polling from the Trades Union Congress found strong majorities of Reform voters are in favour of banning zero hours contracts, giving all workers a right to sick pay and protection against unfair dismissal from day one, and making flexible working easier. Likewise, a majority of 2024 Reform voters support banning no-fault evictions. 

And while Reform 2024 voters do tend to hold more right-wing opinions about the economy than the national average, Reform-curious Labour voters have very different views. According to research from Persuasion UK, majorities of this group think employers and landlords have too much power over workers and tenants, and that more business regulation is in the interests of ordinary people. This suggests that Reform’s economic platform lacks appeal for large swathes of its target voters, and the public at large. 

Reform’s economic offer rests on the idea that deep cuts, deregulation and deportations can deliver growth without painful consequences. The workability of this philosophy has already butted up against reality in local government. It remains to be seen whether voters will have the appetite to repeat this experiment at the national level, or whether other parties will be able to summon up more compelling visions for the UK economy.