Healey to unveil cautious first budget as UK borrowing costs weigh on Burnham government

London, United Kingdom. British finance minister John Healey is due to present a careful budget on Wednesday, aiming to avoid adding to bond market strain on Prime Minister Andy Burnham’s new government. Banks, gambling companies and online marketplaces such as Amazon AMZN.O and Temu PDD.O are expected to face higher taxes.

Tax measures and household support

The additional revenue is expected to fund help for lower-income households struggling with high energy bills, and to keep fuel duty frozen for motorists.

Healey, a former trade union official who served as a junior Treasury minister in the 1990s, has said he wants to offer Britain “a bit of breathing space” from the effects of the Iran war, which is driving inflation higher. In a statement, he described the budget as a way to get the country through a hard period while also setting it on a better course for the future.

Devolution and investment

His first budget is scheduled for delivery in parliament shortly after 12:30 p.m. (1230 GMT). It will set out how the government intends to hand regional mayors greater control over tax revenues, as part of Burnham’s devolution agenda.

In addition, more than £20 billion of extra funding will be channelled to state finance institutions to encourage investment in artificial intelligence, defence and green energy by the early 2030s.

Constraints from the bond market

When Burnham took office in Downing Street in July, he pledged the most sweeping changes in four decades, including a larger state role in the economy. Healey’s room for manoeuvre is nonetheless narrow because government borrowing costs have jumped across the world, Britain included. Investors there still recall the 2022 mini-budget of former Prime Minister Liz Truss, whose unfunded tax cuts set off a bond market meltdown.

On Tuesday, Britain paid its highest interest rate on a 5-year government bond since 2008.

A steadier approach after Reeves

The previous finance minister, Rachel Reeves, delivered two budgets with large tax and spending increases. Against that background, Wednesday’s statement is being portrayed as a “steady as she goes” moment for the British economy, which has so far absorbed the energy price shock caused by the Iran war.