John Healey will deliver his first budget on Wednesday as UK chancellor facing multiple pressures. The Middle East conflict has squeezed the fiscal headroom he inherited from predecessor Rachel Reeves. The Resolution Foundation estimates available headroom has fallen to about £12bn, down from £23.6bn at the spring statement, as debt interest costs have surged. Bond market investors will likely require Healey to retain at least £14bn to avoid triggering negative market reaction.
Healey has earmarked more than £1bn to support energy consumers facing bills forecast to rise to £2,000 annually from January. Since 2021 consumers have paid nearly £14,000 in additional costs for mortgages, loans, energy and water bills. He has also pledged support for businesses, including potential extension of fuel duty cuts.
The budget will introduce devolution measures, including allowing local leaders in England to retain a share of income tax and establishing a £1.5bn borrowing facility for directly elected mayors. Prime Minister Andy Burnham has made "growth in every postcode" a central political slogan.
Healey will address youth unemployment. The number of young people not in education, employment or training has risen to almost 1 million. Geographical analysis from the Youth Futures Foundation shows significantly higher rates in Blackpool, Birmingham and Bradford than in Bath, Harrogate or Guildford. Healey has signalled welfare reform will be critical, though costs could offset savings from system changes. The government awaits recommendations from reviews led by former cabinet minister Alan Milburn and Department for Work and Pensions minister Stephen Timms.
Defence spending will also feature. Healey must find an additional £1bn yearly to fund Labour's defence investment plan, putting spending on track to reach 2.7% of GDP by 2029. Healey has expressed ambition to reach 3% by 2030, which the Institute for Fiscal Studies estimates would require an extra £11bn that year.