The Burnham Healey Budget tensions breaking into the open inside government are sharpening just weeks before Chancellor John Healey is due to deliver his first Budget on 28 October, according to the BBC. Today’s inflation figures have added fresh urgency to questions about whether the new government’s economic vision holds together, and whether its two most powerful figures are really pulling in the same direction.
There is, by multiple accounts, growing unease at senior levels of both the government and the Labour Party about whether the upcoming Budget can back up Andy Burnham’s pledge to deliver the biggest change in British politics in 40 years. A Budget billed as transformative needs to demonstrate that the books are sound, and those two goals are proving harder to reconcile than the government had hoped.
Pressure from advisers and markets
The anxiety has been amplified by voices close to Burnham’s own circle. The former Bank of England chief economist Andy Haldane told LBC on Tuesday that without visible cuts to public spending, ‘the markets now suspect that this is a traditional tax and spend socialist government with better TikTok videos.’ Haldane has at times informally advised Burnham’s operation, which makes the criticism harder to brush off. A similar line has been taken by the prominent economist Lord O’Neill, described in the report as another sometime adviser.
Burnham responded directly, telling reporters: ‘That doesn’t tell the story. We are not that.’ He pointed to the scrapping of the digital ID scheme as evidence of difficult spending decisions already taken. The example is a contested one, however: the digital ID money was not cut but redirected within the government’s first few days to reduce VAT on household electricity bills. The former cabinet minister Darren Jones also criticised Burnham at the time on the basis that the money for digital ID had not actually been allocated in the first place.
Healey, for his part, has struck a noticeably different tone. In his first major speech as chancellor last week, he promised to ‘control public spending’ and praised his predecessor Rachel Reeves for beginning to ‘recover Britain’s fiscal discipline.’ Under Reeves, capital gains tax was raised from 10 per cent to 18 per cent at the basic rate and from 20 per cent to 24 per cent at the higher rate, changes that, according to Yahoo Finance, set the tone for the kind of revenue-raising politics the new team has inherited.
Burnham Healey Budget tensions laid bare inside Labour
People inside the government are starting to question openly whether Burnham and Healey share the same economic instincts. ‘It’s what everyone is thinking and some of us are vocalising,’ one government source said. Burnham and Healey would not be the first prime minister and chancellor to emphasise different things in public. But the gap between the prime minister’s language of sweeping change and the chancellor’s language of fiscal discipline is becoming harder to paper over.
The Budget on 28 October is expected to include some relief on energy costs for households. Bloomberg has reported that Healey is due to unveil further support for energy costs this winter, including through the existing warm homes discount. That would offer political cover, but it also costs money, raising the question of where the savings come from to keep the markets reassured.
One area reportedly under discussion is property. inews has reported that Healey is considering lowering the mansion tax threshold to £1.5 million, with two government sources describing it as a ‘live discussion’ in the Treasury. The Times also reported the same consideration. Whether that would raise enough revenue to satisfy the markets while keeping Labour’s electoral coalition intact is an open question.
The political stakes are clear from recent history. The removal of the Winter Fuel Allowance from most pensioners was among Sir Keir Starmer’s first acts, widely seen as an attempt to prove fiscal credibility. It proved a significant factor in his political difficulties. Labour in government faces a persistent tension: the policies most likely to reassure financial markets may be precisely the ones least likely to hold together its own voter base.
With the Burnham Healey Budget tensions now openly acknowledged inside government, the 28 October statement will be the first concrete test of how (or whether) those competing demands can be met. Healey’s planned warm homes discount support and the mansion tax discussions suggest the Treasury is trying to find that balance, even as some in Labour fear the political cost of the attempt.
