Chancellor John Healey is preparing a cautious budget aimed at reassuring bond investors, Bloomberg reported. The approach could disappoint Labour lawmakers who want more ambitious economic reforms under Prime Minister Andy Burnham.
British Chancellor John Healey is preparing a cautious budget aimed at reassuring bond investors, Bloomberg reported on Saturday. The plan could disappoint Labour lawmakers seeking bolder reforms under Burnham.
Fiscal discipline takes priority
Healey's first budget, scheduled for Wednesday, is expected to prioritise fiscal discipline, avoid broad tax increases and preserve confidence in British government debt. According to Bloomberg, the Treasury is considering higher taxes on banks to finance targeted, temporary assistance for households struggling with rising energy costs.
The chancellor is also expected to maintain a fiscal buffer of at least £15 billion ($20 billion), based on a Bloomberg survey of primary dealers. Meanwhile, British government bonds have recently outperformed some European peers as investors welcomed signals that the administration would avoid significant increases in borrowing.
Labour lawmakers expected more
However, the approach risks creating tensions within Labour, where lawmakers had anticipated more substantial policy changes after Burnham replaced Keir Starmer in July. Burnham previously outlined proposals to revise Britain's Brexit arrangements and establish a national social care service, but the budget is unlikely to advance those priorities significantly.
Major decisions on defence expenditure and welfare reductions have also been postponed, according to the report. Treasury officials rejected suggestions that the budget would lack ambition, indicating that additional cost-of-living measures could still be announced.
Risks beyond the budget
Government officials are particularly concerned about the economic consequences of further escalation in the U.S.-Iran conflict, which could disrupt energy supplies and undermine fiscal forecasts. The political challenge also comes despite improved polling, with Labour moving ahead of Reform UK since Burnham became prime minister.
Disagreements over immigration, welfare reform and the government's forthcoming 10-year policy plan could further test Labour unity after Wednesday's budget.
Source: Investing.com
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