John Healey has promised to use his first budget in a fortnight’s time to offer consumers and businesses a “breathing space” while sticking to Labour’s fiscal rules.
Speaking to journalists in Bangkok, where he has been attending the International Monetary Fund (IMF) annual meetings, the chancellor said he was conscious of rising costs.
“I want the budget to be a budget that gives Britain a bit of breathing space – but also reinforces the strength of our fiscal plans and the strength of our resilience and our economy for the future,” he said.
The government has already cut VAT on electricity bills, but Healey is expected to announce a further package of energy support at his 28 October tax and spending statement, before what is expected to be a sharp rise in the energy price cap in January.
He said: “The prime minister’s talked about recognising the cost of business, not just the cost of living.”
Healey also reiterated his insistence that he will be sticking to the spending plans set out by his predecessor, Rachel Reeves, at last year’s spending review – and cabinet colleagues will have to find any additional resources within their existing budgets.
“When the second half of a spending review is in place, there are pressures on departments, and colleagues are doing a good job of managing with what they’ve got.” He added: “You have to reprioritise if you want to do fresh things.”
The UK has been praised by the IMF this week for setting out a plan to tackle its deficit, with the fund’s managing director, Kristalina Georgieva, urging the government to “stay the course”.
Healey stressed that he would stick to the rules set out by Reeves. “We will meet those fiscal rules, and I think one of the hallmarks of the IMF’s backing of our fiscal plans is recognition that there isn’t just a forecast for the future, but there’s some evidence of performance already.”
He declined to say whether he would increase taxes on banks, or raise capital gains tax, to offset the expected pressure on his budget from higher energy prices and government borrowing costs.
“If you think back to the run-up to previous budgets, the speculation about what was set to be in those budgets was actually deeply damaging,” he said. “It led to people cashing in their pensions early when they didn’t need to. It led to people holding back or not investing in their businesses when they didn’t need to. So I’m just not going to get drawn into any speculation.”
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The former defence secretary also hinted that he was working on an additional package of support for Ukraine, to be announced at the budget.
He said: “I’m working on different ways we can step up support for Ukraine: military, diplomatic and economic, and you know, if anybody needed any reminder of that, it’s what we see coming out of Ukraine, with Putin targeting these energy systems with thousands without power, as we’ve got a harsh winter approaching.
“The step back from this is that the future of Ukraine is the future of European security, and that’s why it’s so crucial that Putin doesn’t prevail.”
Healey and the Bank of England governor, Andrew Bailey, chaired a meeting of G20 policymakers on Thursday morning, in the absence of the US Treasury secretary, Scott Bessent.
The chancellor will fly back to London on Thursday evening to put the finishing touches to the budget.
