John Healey prepares UK Budget expected to have smaller tax and spending changes

Bank levy, energy aid, minimum wage and devolution are among expected measures

UK Chancellor John Healey is preparing a Budget expected to make smaller changes to tax and spending than in some recent years. The government under Prime Minister Andy Burnham has promised not to raise income tax, national insurance or VAT. Many expect cost-of-living support, particularly through energy bills, to be aimed at the most vulnerable, while banks are braced for a levy or surcharge that may finance it.

Political editor Chris Mason cited two statements about the government’s ambitions. Days before Burnham became prime minister, Burnham said: “This change…is the most significant change moment in our politics for 40 years.” Last month, Healey said: “The money New Labour had in the 90s is simply not there now….Britain has it harder now”.

Institute of Fiscal Studies director Helen Miller said: “We have a relatively new government with seemingly big ambitions but facing a long list of constraints.” She said some constraints were self-imposed, while others were being worsened by global events, most noticeably the war in the Middle East. Mason described the wider pressures as a generationally high tax burden, a sky-high national debt, rising energy bills and inflation higher than expected.

Many people across Westminster, including across parties, are expected to argue that the amount of money available is not everything because how well taxpayers’ money is spent and where it is spent also matter. Plenty of participants argue that spending less and taxing less should be priorities.

In Mason’s characterization, many in the Labour Party favor an active role for government and the state in driving change and improvements in people’s lives. He described that view as one in which governments should proudly step in rather than get out of the way.

Support on the cost of living, particularly energy bills, is expected to be targeted at the most vulnerable. Banks are braced for a levy or surcharge that may pay for this support. A separate BBC Budget preview lists a tax on banks, energy-bill help and a minimum-wage rise among the measures that could be included.

A linked BBC report says the minimum wage is set to rise, but 18- to 20-year-olds will not receive the larger increase.

One linked BBC preview sets out four possible ways Labour could raise money in the Budget without increasing income tax. Another linked BBC item reports that Jackdaw has been approved but tricky energy trade-offs remain.

A separate BBC analysis says Healey’s Budget needs to sustain the stronger economy through gathering clouds. Ministers counter that the constraints do not mean the government is powerless.

Further defence spending is expected to be announced. The government has not yet explained how spending of 3% of national income on security will be delivered by 2030; those details will come in next year’s Spending Review.

Devolution, including handing power away from Westminster and closer to local communities, will be central. Healey told BBC Newscast there would be “really radical devolution of powers and resources to local leaders that are often better placed to get beyond the departmental systems.” Some at Westminster fret that extra money for mayors and others in local government is not yet accompanied by adequate checks and balances to ensure that money is well spent.

Healey is expected to argue that the economy is becoming more robust. Growth and productivity have performed better than forecast, and unemployment is down.

The Resolution Foundation said: “John Healey’s problem is that conflict in the Middle East has once again pushed up energy prices and interest rates.” It added: “So, despite the signs that the UK economy is becoming more resilient, household and public finances are in for another shock.”

Mason expects a smaller scale of tax and spending changes compared with some recent Budgets. Healey has talked up the desire to offer “breathing space” and “hope,” which Mason characterized as a tacit acknowledgment of the limits on what the government can do. The IFS describes the pledge not to raise income tax, national insurance or VAT as a self-imposed constraint.

Mason wrote that many would ask whether the Budget is, or can be, big enough to meet the moment and that opposition parties would argue it amounts to tinkering. The government will seek to present the Budget as one of several moments in the coming weeks and months intended to deliver the scale of change Burnham has promised.