John Healey will present his first budget on Wednesday, which will set the tone for Andy Burnham’s premiership. Despite the chancellor’s promises in the summer that the tax and spending event would not be beset by the leaks that preceded those of his predecessor, Rachel Reeves, both official and unofficial sources have indicated much of what Healey is likely to announce. Here’s what to expect: Healey will allocate about £1.42tn this year on day-to-day spending and public investment.
About £100bn of this will go on debt interest after a rise in the interest rate the government pays to multidecade highs. Most of this increase can be blamed on the Gulf conflict launched by the US and Israel at the end of February, which has taken the oil price to above $110 a barrel and the price of gas to levels not seen since late 2022. Government borrowing in this financial year has fallen compared with 2025-26, but not by as much as the Office for Budget Responsibility estimated in March, mainly owing to higher debt financing.
Healey is spending about £1bn a month more than forecast. Those costs mean the buffer of £24bn built up in the last tax-raising budget is likely to have halved to £12bn, according to the Resolution Foundation thinktank. The Treasury would be more comfortable having this headroom at about £15bn, according to economists at ING.
It’s a headache the chancellor could do without when he needs extra cash to fund cost of living measures, but also higher defence spending and the prime minister’s pet projects, such as devolution. The chancellor has promised to give consumers and businesses “breathing space” with a range of measures to help with soaring costs. Everyday fixes: This is what the Treasury calls its proposals to help struggling households.
They include an extension of parental pay to more than 150,000 additional parents per year worth £388, including self-employed fathers and partners who have previously missed out. Healey will also end the carer’s allowance cliff-edge, so unpaid carers no longer lose more than their allowance once they hit their weekly earnings limit. He will also remove import tariffs on more than 100 products, including baked beans, chocolate and gherkins, to reduce their shop prices.
Energy bills: The chancellor is planning to spend more than £1bn to help poorer households struggling with soaring gas and electricity bills, with the bulk going towards an expansion of the existing Warm Home Discount. An additional £100 could be added to this £150 means-tested yearly rebate, funded by taxes rather than billpayers as the current discount is. Burnham has already suspended VAT on electricity bills for six months and said last week he had asked the Treasury to explore abolishing standing charges on gas bills.
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