What to expect from John Healey’s first Budget as Chancellor
John Healey will deliver his first Budget as Chancellor on Wednesday against the backdrop of a difficult domestic economic situation, made worse by the international market turmoil caused by the Iran war.
Here, the Press Association looks at what can be expected from Mr Healey’s statement.
– The state of the public finances
The Chancellor will have limited scope for big Budget giveaways due to the stretched public finances.
He is likely to have significantly reduced headroom – the buffer against his fiscal rules – at this year’s Budget because of the increased cost of Government borrowing resulting from the Iran war.
Mr Healey is sticking with the rules set by predecessor Rachel Reeves, requiring day-to-day spending to be financed by taxes rather than borrowing by 2029/30 and that public debt as a share of the economy should fall in the same year.
In March the headroom was forecast by the Office for Budget Responsibility (OBR) to be around £24 billion but the Resolution Foundation estimates that could have halved to £12 billion. The Institute for Fiscal Studies (IFS) thinks it could still be around £20 billion.
– “Breathing space” for households and businesses
Changes aimed at easing the impact of rising costs are expected to feature heavily in the Budget.
The Prime Minister has ordered the Chancellor and Energy Secretary Miatta Fahnbulleh to examine scrapping standing charges from gas bills.
He also wants to break the link to stop the price of wholesale gas setting electricity bills, even though the fossil fuel only makes up a small percentage of total generation.
With pump prices for petrol and diesel soaring, Mr Healey has reportedly bowed to pressure to cancel January’s planned increase in fuel duty, keeping the rate of the levy frozen for the 16th year at 52p per litre.
A series of “everyday fixes” announced on the eve of the Budget include replacing the Carers’ Allowance cliff edge, which has penalised unpaid carers for going over their earnings limit, with a taper system; making a higher tax-free mileage allowance of 55p permanent; slashing tariffs on a range of popular foods including chocolate and gherkins; and extending parental pay to more than 150,000 parents each year.
The Chancellor is also set to announce a rise in the minimum wage by nearly 4%, while ending the trend of hiking the national minimum wage for those aged 18 to 20 by more than the rate for older workers, raising it instead roughly in line with the rate for over 21-year-olds, according to reports.
– Slashing red tape
The Treasury estimates that reducing paperwork for businesses could save firms around £800 million.
– Capital gains tax rise ruled out
The Chancellor has rejected the possibility of hiking capital gains tax, the levy on profits from selling assets, at the Budget despite calls from within Labour to make the rate closer to that on earnings.
– Bank tax under consideration
The Chancellor is reportedly considering increasing the surcharge on bank profits from 3% to 8%, reversing a tax cut for the sector launched by former chancellor Jeremy Hunt.
The Trades Union Congress, a supporter of the move, said the hike on the “bumper profits” of banks would raise £2.25 billion a year.
But City representatives have claimed the move will stifle investment in Britain.
– £4.7 billion defence black hole
The Chancellor has promised to fill a £4.7 billion black hole in Britain’s defence investment plan (Dip).
The Dip, one of Sir Keir Starmer’s final major announcements as prime minister, promised an extra £15 billion of funding for the UK defence sector but only committed £10.3 billion to it, leaving the rest for Mr Healey to find.
The extra cash means Government spending on defence will rise to a 2.7% share of the economy by 2027.
The path to Nato’s 3.5% of gross domestic product target by 2035 will be set out at the spending review next year but there will be keen interest in any signals Mr Healey gives about increases.
The Chancellor resigned as Sir Keir’s defence secretary in a row over funding, arguing that it was necessary to set out a plan to reach 3% in 2030, something the OBR estimates would cost an extra £17.3 billion in 2029-30.
– AI
More than £600 million will be committed to various projects on the development and safe use of artificial intelligence, including £165 million for a national AI biosecurity initiative, an extra £120 million for the AI Security Institute and £60 million for a national cyber shield using AI to protect against hackers.
– Olympics
A £7 million fund will be used for a feasibility study into a possible future bid to hold the Olympics and Paralympics in northern England.
– Devolution
An initial £285 million will be allocated as part of a plan to give mayors and regional leaders in England more money and power to invest in projects in their areas.
– Social housing
More than £1 billion will be allocated for social and affordable housing.
– Rough sleeping
A further £432 million will be committed to the rough sleeping programme to get people off the streets in England.
Published: by Radio NewsHub
