Healey Prepares First Budget Amid Fiscal Tightrope Walk
Chancellor faces pressure to fund new pledges and military spending while maintaining fiscal discipline, as IMF praises UK's deficit management.
Callum Smith
John Healey is preparing to deliver his first Budget as chancellor.
These savings are essential to ramp up Britain’s military spending. The Chancellor must also fully fund the string of pledges the Prime Minister set out during his first weeks in office.
Healey spoke from the IMF meeting in Bangkok. The organization praised the UK for its long-term budget deficit management and its reduction compared to other countries.
He acknowledged the current economic climate, stating, "Well, it’s a tough time. People can people can see the global economic conflicts, they know the pressure it’s putting on them, they understand it’s putting pressure on the Government."
Well, it’s a tough time. People can people can see the global economic conflicts, they know the pressure it’s putting on them, they understand it’s putting pressure on the Government.
He chaired a G20 policymakers meeting alongside the Bank of England governor, Andrew Bailey. The government accepts more must be done to help households struggling with rising energy costs.
A looming energy price cap rise in January intensifies this struggle. A 4 per cent hike to Ofgem's energy price cap took effect from October 1, and fuel duty is due to rise on January 1, from almost 53p per litre to almost 56p.
UK households have paid an additional £13,961 on average for mortgages, loans, energy, and water bills since 2021. This figure comes from Trades Union Congress analysis based on official figures.
Consumer spending in the UK has shown the weakest growth in the G7 since before the pandemic.
Potential policy measures include the 'Your First Home' scheme. This scheme will give savers access to a mortgage with a 2.5 per cent deposit.
Last year, former chancellor Rachel Reeves announced a high-value council tax surcharge. Owners of properties valued at over £2m will start paying a regular annual charge worth up to £7,500 from April 2028.
Andy Burnham has already cut VAT on electricity bills. Healey's prior role as defence secretary, from which he resigned ahead of the publication of the Defence Investment Plan, provides context for potential defence spending considerations.
Healey affirmed his commitment to fiscal discipline, stating, "Look, I’ll set out all the figures as you’d expect in two weeks’ time at the Budget. But people recognise these times that are tough for everyone, and what they do expect of a Government is to manage with the budgets we’ve got, deliver the public services they need, and that’s the challenge for Government. Our departments have the spending, and the Prime Minister and I being in lockstep about this. Where we want to do things, we have to make sure that we can pay for them within the budgets that we’ve got and control spending, and that’s part of the discipline. That’s part of the discipline that the IMF here in Bangkok this week has endorsed that they see in Britain, and perhaps want to see more from other countries too."