Chancellor John Healey will use a speech in Coventry on Monday to announce the John Healey northern fund, a £150m package for businesses across the north of England, even as rising government borrowing costs cast a long shadow over next month’s Budget.
The fund will provide investments of between £5m and £15m to what Healey’s team describes as the ‘most innovative and fast-growing firms’ in the region, including university spin-outs and other ‘ambitious businesses’. According to the British Business Bank, the fund is designed to deliver larger-scale investments that complement the Bank’s existing Northern Powerhouse Investment Fund II, plugging a gap in the support available to growing companies at scale.
The money comes from funds already allocated to the British Business Bank and forms part of what Healey is calling a wider plan to spread economic growth more evenly around the UK.
A ‘new story’ for the economy
In his Coventry speech, Healey is expected to describe a Britain not just ‘turning the corner’ but ‘resilient, optimistic and ready to seize the opportunities of new technologies and ideas’. He will tell his audience: ‘The prime minister laid out a clear diagnosis of what has gone wrong in the past. The solution is a fundamental shift that starts with putting power in the right places. The next chapter of Britain’s growth story will be written in more places.’
The upbeat framing is a deliberate political choice. Downing Street wants to lift consumer and business confidence ahead of the Budget on 28 October, contrasting with the early tone of the previous Labour administration under Sir Keir Starmer, who faced criticism for warning of ‘difficult decisions’ shortly after Labour won the election. The chancellor has said he is as committed to balancing the books as his predecessor, Rachel Reeves, but the language he uses is, for now, markedly warmer.
Helen Miller, director of the Institute for Fiscal Studies, offered a cautious response. ‘Economic growth in every postcode sounds great and is something we would all love,’ she said. ‘I think it’ll actually be much harder to achieve in practice.’ She added that she could see how the government might build stronger second and third cities, but was less clear on ‘how it would drive growth in literally every postcode’, as Prime Minister Andy Burnham has promised.
John Healey’s northern fund faces a difficult fiscal backdrop
The optimistic pitch comes against a backdrop of deteriorating public finances. According to Reuters, the cumulative deficit for April to August stood at £77.3 billion, which was £8.1 billion higher than the Office for Budget Responsibility had projected at this point in the year. The previous financial year’s borrowing figure was also revised upward by £4.5 billion to £134.3 billion. Meanwhile, the fiscal buffer that the government had available stood at more than £24 billion in March, a cushion that looks thinner against those overshoots.
UK long-term borrowing costs have hit their highest level since 1998, and during Prime Minister Andy Burnham’s first Prime Minister’s Questions on Wednesday, Conservative leader Kemi Badenoch pressed him on how he intended to manage the rising debt. Burnham attributed the situation to the previous Conservative administration and said his government would be ‘grounded in fiscal responsibility’.
Rupert Harrison, senior adviser at bond giant Pimco and former chief of staff to Tory chancellor George Osborne, told the BBC’s Today programme that the UK was being treated as ‘guilty until proven innocent’ in terms of fiscal responsibility. He said the country had once been trusted by bond markets to ‘get its house back in order when things go wrong’, but had lost credibility in part because of former Prime Minister Liz Truss’s mini-Budget, decisions to defer deficit reduction, and UK inflation remaining above the Bank of England’s 2% target since the pandemic.
The backdrop is not only financial. Near Coventry, Jaguar Land Rover is planning to cut thousands of jobs, hit by competition from Chinese manufacturers, US tariffs on UK vehicles, and the after-effects of a cyber attack. Healey is also contending with concerns about the inflationary impact of the Iran war on government spending plans.
Opposition figures were quick to reject the chancellor’s framing. Shadow chancellor Andrew Griffith said Healey’s plan would do ‘little to comfort hard-working families and businesses across the country who are worried about more tax rises or the fact that government borrowing rates are near a 28-year high’. Liberal Democrat deputy leader Daisy Cooper called the HM Treasury announcement underwhelming, saying the £150m spread ‘across the entire north of England will barely shift the dial on growth’. Reform UK’s economic spokesman Robert Jenrick dismissed Healey as ‘an empty vessel with no idea about how to rescue our economy’.
The 28 October Budget will be the moment Healey must move from upbeat language to hard numbers, with the borrowing overshoot already confirmed as running well ahead of official forecasts.
