Budget to be held in October, Healey announces

Chancellor John Healey has revealed that his inaugural budget will take place on Wednesday, October 28, emphasizing a commitment to fiscal discipline.

In a video statement, Healey articulated his vision for the budget, stating, "This will be a Budget that moves money and power out of Westminster, and into every postcode around Britain. It will be built on fiscal discipline. It will meet our fiscal rules. It'll give businesses and families some of the stability they need to plan for the future. Now, let's get on with the job."

Prime Minister Andy Burnham has affirmed his government's intention to adhere to Labour's fiscal rules regarding spending and borrowing. He also pledged to uphold the party's 2024 manifesto commitments, which include not increasing income tax, VAT, or national insurance contributions. Furthermore, Burnham committed to honoring the fiscal rules established by Healey's predecessor, Rachel Reeves, which mandate balancing day-to-day spending with tax revenues by the end of the decade.

Earlier this week, a prominent think tank cautioned that the prime minister has limited room for maneuver to achieve these goals. They suggested that Healey might need to implement spending cuts or tax increases to fund Burnham's policy priorities, such as increased defense spending and improved social care.

Healey, who previously served as Defence Secretary under Keir Starmer, resigned from that role due to a disagreement over defense spending. He had expressed his "certainty" that Britain should raise its defense spending to 3% by 2030. However, when questioned about funding on Thursday, Burnham's Defence Secretary Wes Streeting repeatedly declined to commit to that specific target. Streeting stated, "Before we set out specific spending commitments, we will also set out how we pay for them at the same time."

Chris Mason noted that the new chancellor faces difficult spending choices, and Burnham's ambitious ideas will come with a cost.

Reeves had left a £22 billion buffer in her last budget, but persistent inflation, exacerbated by the Iran war, may have diminished this reserve. Since taking office earlier this month, Burnham has also announced several new cost-of-living policies, including the elimination of VAT from domestic electricity bills.

On Friday, the Prime Minister declared his intention to grant mayors of city regions across England a share of income tax revenue for the first time, as part of his efforts to decentralize power from London. Reeves had previously indicated that regional mayors could be given control over some tax revenue to allocate to their local priorities. Labour's 2024 election manifesto included a pledge to devolve more powers to local councils and mayors in areas such as housing and transport. While more details of Burnham's plan are expected in the Budget, the government has stated that the income tax rate will not change as a direct consequence of these reforms.

Tom Selby, public policy director at AJ Bell, commented that Healey "doesn't have the luxury of pointing the finger of blame at the last administration." He added, "Healey will likely spend a chunk of his time leafing through the thesaurus looking for new ways to rephrase the 'tough choices' message of his predecessor."

Shadow chancellor Sir Mel Stride criticized the budget date announcement, stating it meant "89 more days of unfunded spending commitments and damaging tax speculation until we get some details." He further remarked, "89 more days for Brits to wait before they know how much their taxes are going to go up to fund Burnham's spending addiction."

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