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John Healey’s first Budget under Prime Minister Andy Burnham: a “steady-as-she-goes” fiscal plan
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Healey’s first Budget: a “breathing-space” plan for households and business
On 28 October Chancellor John Healey will present his maiden Budget as the finance chief of a Labour government that has pledged not to raise income tax, VAT or National Insurance. The package is expected to combine modest energy-bill relief, a decision not to raise Capital Gains Tax (CGT), and a possible increase in the banking surcharge that sits on top of corporation tax.
Fiscal context and headroom constraints
Government debt hit £3 trillion and borrowing to date is £98 billion, about £6 billion above the March forecast. Debt-interest payments in September were £11 billion. The Office for Budget Responsibility had estimated fiscal “headroom” of £24 billion after the 2024-25 budget, but Treasury officials say it has fallen to £10-12 billion. Inflation rose to 3.5 % in September, above the 3.4 % forecast, driven by higher petrol and diesel prices.
Key fiscal numbers
- Debt: £3 trillion
- Borrowing YTD: £98 billion (+£6 billion vs. forecast)
- Debt-interest (Sept): £11 billion
- Headroom: £10-12 billion
- Inflation (Sept): 3.5 % (vs. 3.4 % forecast)
- Average household energy bill: £1,723 per year; analysts warn it could rise to £2,100 by January without further action.
Policy priorities: energy support, tax stance and business measures
- Energy relief: Burnham has asked ministers to consider removing the standing charge from gas bills; the VAT cut on electricity (5 % to 0 % until 31 March 2027) will remain. The Warm Homes Discount may be expanded by £100 million to raise the rebate from £150 to £250 per household.
- Capital Gains Tax: Healey has ruled out any increase to the 24 % CGT rate for higher-rate taxpayers, citing concerns that a hike would prompt wealthy individuals to defer asset sales or leave the UK.
- Banking surcharge: The Chancellor is expected to raise the 3 % levy on the four largest banks back toward the 8 % level removed in 2023, projected to raise roughly £2 billion a year.
- Online-retailer VAT: A proposal to require platforms such as Amazon to collect VAT at source on sales above £90,000 could generate about £1 billion for a business-rates cut for high-street shops.
- Other levies: A new tax on gambling machines and a possible revival of entrepreneurs’ relief for start-up gains are also being discussed.
Official statements from the Chancellor and the Prime Minister
Burnham has described the upcoming Budget as “challenging” but emphasized a “steady-as-she-goes” approach that avoids large-scale revenue-raising measures.
Conflicting reports and remaining uncertainties
Early speculation suggested a possible CGT rise to align with income-tax rates, but Treasury sources confirmed the Chancellor has ruled out any such increase. Likewise, some reports hinted at a major tax on family-business inheritances; the Treasury has not confirmed any such policy, leaving the exact composition of the revenue-raising mix uncertain.
Verbatim quotes
- “No one should be forced to choose between heating their home, putting food on the table and managing their health.” — Matt Copelands, interim director of policy
What’s next
- 28 October: Chancellor John Healey delivers the Budget.
- 21 October: New inflation and borrowing data are expected to shape the final Budget narrative.
- 5 November: The Bank of England is slated to consider a benchmark rate increase to 4 %.
The upcoming Budget will test Labour’s ability to balance modest fiscal relief with the need to preserve a fragile fiscal buffer in a high-inflation, high-debt environment.