Burnham’s government unveils its first UK budget: What to expect

SaveSharefacebookxwhatsapp-strokecopylinkBritain's Prime Minister Andy Burnham congratulates Britain's Chancellor of the Exchequer John Healey after he delivered a speech on the second day of the annual Labour Party conference in Liverpool, northwest England, on September 28, 2026 [AFP]By Edna MohamedPublished On 28 Oct 202628 Oct 2026British Chancellor John Healey will set out the country’s autumn budget, the government’s tax and spending plans, the first under Prime Minister Andy Burnham’s premiership amid high inflation and government spending levels.While the budget will be announced in parliament on Wednesday at 12.30 GMT, speculation about what it will lay out has ranged from a series of tax announcements to commitments to defence spending.Recommended Stories list of 3 itemslist 1 of 3How is the US-Israeli war on Iran causing havoc in Europe?list 2 of 3UK prosecutors charge two after RAF Fairford incidentlist 3 of 3King Charles’s Caribbean tour: Will he discuss slavery reparations?end of listBut the country continues to deal with a rising cost-of-living crisis and energy bills are expected to see their biggest rise in four years in January due to the ongoing conflict in the Middle East.As total United Kingdom borrowing broke through the 3 trillion pounds ($3.99 trillion) barrier for the first time in September, the country is already spending 100 billion pounds ($133bn) each year just on servicing that debt.Despite that challenge, the chancellor has said the budget will move “money and power out of Westminster and into every postcode around Britain”.In a speech last month, Healey said that he and Burnham were in “lockstep” in meeting fiscal rules, “to balancing the books, with a buffer to protect against uncertainty, to control borrowing to bear down on inflation, and reducing long-term pressures on our public finances”.Following the two budgets from former Chancellor Rachel Reeves, which included big tax and spending increases, Healey’s budget is expected to take a more “steady as she goes” line, which some say is the wrong approach.Here’s how he will be expected to achieve that. Defence spendingOn Monday, Burnham said Healey would set out a plan to fully fund the government’s defence plans and commitments, telling ITV’s Good Morning Britain that his government’s first challenge was financing the already announced defence investment plan.Announced in June, the plan is backed by 298 billion pounds ($396bn) of investment and will transform the armed forces as the country moves to “warfighting readiness” and stepping up “European security”, according to a government policy paper.But Burnham said it was “crucial that we have a funded plan that we can then implement, and we will set out more details on Wednesday as to how we’ve done that”.He added that NATO commitments of spending 3 percent of gross domestic product (GDP) on defence spending by 2030 and 3.5 percent by 2035 are included in the pathway, explaining that national security issues were “at the top of the priority list”.As it stands, Britain spends about 2.6 percent of its GDP on defence.The Guardian reported that on defence spending, Healey aims to close a 4.7-billion-pound ($6.2bn) funding gap in the government’s plan inherited from the previous Labour Party leader, with cuts to other departmental budgets likely to fund it.InflationGovernment borrowing and inflation continue to rise, which is a potential spanner in the works for proposed spending.Last week, UK inflation and government borrowing both hit their highest levels in a year.According to the Office for National Statistics, borrowing was nearly 25 billion pounds ($33bn) last month alone, “a little higher than a year earlier, as spending, including higher debt interest costs, increased more than government income, partly reflecting the impacts of inflation”.ONS added that in the financial year to September 2026, borrowing remained below the same period last year, but it was higher than the Office for Budget Responsibility’s forecast.However, debt at the end of last month exceeded 3 trillion pounds ($3.99 trillion), much of it due to the Iran war and the fallout from the closure of the Strait of Hormuz as the government borrowed more than expected.According to Jasper Kanter, a professorial research fellow in ecological economics at Aberystwyth Business School, for the government to grow the economy without raising inflation levels, there needs to be an understanding of what kind of economy is created.“The strongest policies improve prosperity, resilience and sustainability at the same time,” Kanter said.“Growth is less likely to be inflationary when it comes from increasing the economy’s productive capacity rather than simply boosting spending. Measures that improve skills, reduce energy dependence, strengthen local economies and regenerate ecosystems are likely to deliver more lasting benefits than short-term stimulus,” he added.Moreover, Helen Miller, director of the Institute for Fiscal Studies, said in a media release ahead of the budget that Healey “faces a forecast in which borrowing is still expected to fall in coming years, and the fiscal rules are still being met”.“Despite that, a ‘steady-as-she-goes’ budget is not an option available to the chancellor. Choosing to stay the course with the inherited tax and spending plans would mean allowing inflation to blow departments’ spending plans off course,” Miller said.Tax on banks, online sellersThe budget is also expected to reveal new taxes on banks and online marketplaces such as Amazon, Temu and eBay, as well as a funding boost for mayoralties and local authorities.The biggest four banks collectively made about profits of 15 billion pounds ($19.9bn) in the first six months of this year. Trade unions are calling for higher taxes on those earnings, the BBC has reported.According to the BBC, the Treasury is leaning towards changing a 2023 surcharge rate on banks, which would raise about 2 billion pounds ($2.6bn).On marketplaces such as Amazon, Healey is reportedly looking to crack down on foreign sellers who avoid paying VAT – a UK sales tax – which is expected to raise as much as 1 billion pounds ($1.3bn) and help fund business rate cuts for high street shops, The Times reported.Paying for social care and benefitsAccording to The Guardian newspaper, Healey is expected to allocate about 1.42 trillion pounds ($1.8 trillion) this year for day-to-day spending and public investment, with about 100 billion pounds ($132.8bn) going on debt interest.Kanter, of Aberystwyth Business School, told Al Jazeera that he expects “targeted support rather than large-scale tax cuts or rises” in the budget announcement.“The government appears keen to signal empathy with the pressures many people are facing. Addressing the harsh cliff edge in carer’s allowance and expanding parental pay are good examples of this,” he said.Some of the budget’s contents have already been announced, including ending the carers’ allowance limit and removing tariffs on a range of food items, including chocolate and beans, to make them cheaper for shoppers.Pensioners are also expected to be shielded from income tax through the introduction of a new personal allowance, while Healey is expected to add another 1 billion pounds ($1.3bn) to the 39 billion pounds ($51.8bn) planned for social and affordable housing in England over the next decade.“Pensioners will benefit from another substantial increase in the state pension, while low-paid workers will benefit from increases in the minimum wage. For most households, the bigger determinants of living standards will remain wages, inflation and energy costs rather than any new tax measures announced in the budget,” Kanter explained.Last month, Burnham announced a new national care service to provide free personal care for elderly people. As costs of care for the elderly have soared in the UK, this was a major issue from the outset of Burnham’s premiership.He said the plan would be introduced in phases and would be fully funded from public spending and savings from scrapping the state pension triple lock – an annual increase in state pension that goes up with inflation, wages or a fixed rate of 2.5 percent, whichever is highest.A report on how this will be implemented is due in summer 2027.Energy billsAmid high gas and oil prices as a result of the US-Israeli war with Iran and the subsequent closure of the Strait of Hormuz, energy prices worldwide have increased, with Brent crude futures at $115.90 a barrel on Wednesday.In the UK, energy prices are predicted to reach nearly 2,000 pounds ($2,655) a year for households in January after energy consultancy Cornwall Insight projected in its latest forecast last month that the government’s cap on energy prices is expected to increase by 16 percent.On energy bills, reports suggest the chancellor is expected to announce help for households in the budget by scrapping standing charges for energy supply, among other things.