UK Chancellor John Healey said he would maintain fiscal discipline and support growth while giving businesses and families “breathing space” in his forthcoming annual budget, CNBC reported on Oct. 27.
The statement will be the first under Britain's new prime minister. It follows a previous budget marred by leaks and the premature release of the full statement by the Office for Budget Responsibility, Britain's fiscal watchdog.
CNBC International's “UK Budget: Can Healey balance spending and fiscal discipline?” described a government seeking to avoid a repeat while facing demands for spending and constraints on raising taxes.
Healey said his priorities put support for businesses and households alongside his commitment to control the public finances. The remarks did not specify how much money he would provide for relief or how he would finance it.
The economic backdrop has become more difficult since March. The US war with Iran has pushed up energy prices and government bond yields, increasing the cost of borrowing.
That leaves less room for the government to absorb additional costs while keeping to its budget commitments. The amount of room Healey would retain, and any tax increases to protect it, remained open.
Government borrowing exceeded expectations in September, while monthly interest payments reached a record. Those costs form part of the pressure on the public finances ahead of the statement.
Labour's 2024 election manifesto ruled out increases in income tax, corporation tax, National Insurance and value-added tax. Those commitments restrict the government's options for financing any measures to ease living costs.
Healey has also ruled out an increase in capital gains tax, a tax on profits from selling assets. Some Labour lawmakers had supported raising it.
Attention has turned instead to a possible increase in the bank surcharge, an extra tax on lenders' profits. The remarks gave no proposed rate or estimate of how much an increase would raise.
The head of Britain's biggest bank linked the industry's ability to finance companies with the government's growth ambitions in an interview with CNBC.
“Banks have a role in financing the whole economy,” the bank chief said. “So you do need for growth a very strong banking sector.”
The executive said banks needed to support businesses' investment over the long term to help deliver growth.
Beyond the immediate decisions on taxation, the government faces spending promises made by the prime minister and an unfilled gap in defence funding. The remarks supplied no timetable or financing plan for closing that gap.
