Chancellor John Healey is preparing for a crucial budget on October 28, 2026, aiming to provide relief to struggling consumers while buying himself some political breathing space. Healey, who took over from Rachel Reeves, has been holding weekly curry nights with Prime Minister Andy Burnham to discuss politics and policy. These informal meetings are seen as a way for Healey to break away from cautious Treasury officials and explore new ideas.
The budget will be closely watched as it sets the stage for the next phase of Labour's agenda, potentially leading to an election by May 2028. Healey is expected to postpone key decisions, such as increasing defense spending to 3% of GDP, until a spending review next year. The IMF has praised the UK's economic plan, noting it as the only G7 country with a strategy to tackle its budget deficit, and revised up its growth forecast for 2026 despite the impact of the Iran war.
Healey's focus is on supporting small businesses and self-employed individuals, particularly in his South Yorkshire constituency. He is likely to propose modest tax increases, including on banks, and offer targeted energy support. However, with the Bank of England expected to raise interest rates and inflation set to exceed 4% next year, consumers may not feel significant relief. Some Labour figures have urged Healey to be more direct about the link between rising costs and Donald Trump's Iran war.
Despite the challenges, Healey has inherited a stable Treasury from Reeves and is working with key advisers like Spencer Thompson and Ravinder Athwal. However, there are whispers of tension between Healey and Burnham over their differing approaches to economic policy. The budget's success will be critical for the future of the Burnham project and Labour's electoral prospects.