John Healey’s first Budget, USA News (London): When John Healey stood up at the Despatch Box to deliver his maiden Budget on Wednesday, he had reason to feel confident. His morning had begun with a bacon sandwich topped with his favourite HP sauce and a positive phone call with Ukrainian President Volodymyr Zelensky, who was buoyed by an extra £10bn package of support to fight the war against Russia. Yet as the dust begins to settle from the Budget, there are signs that Healey’s afterglow could soon fade.
While many Labour MPs were jubilant that there was a surprise cost of living giveaway for millions of people in the so-called “squeezed middle” – a £100 energy bills payment this winter for 20 million homes in council tax bands A to D – some questioned the lack of “ambition” in the package. Despite the feel-good factor from the energy giveaway, the Office for Budget Responsibility (OBR) issued a grim assessment of Britons’ living standards, which will have only improved by a meagre 1 per cent over the decade since the start of the pandemic. There are also signs that another surprise announcement – that landlords will face a 4 per cent hike in tax on rental income from next year – will backfire.
Tax Hike on Landlords and Rising Welfare Bill
The OBR has warned that this tax on landlords will be passed on to private renters, who are already feeling squeezed. The fiscal watchdog also cautioned that fewer landlords in the market will give those that remain greater “price-setting power” and flexibility to raise rents. A Treasury insider had revealed before the Budget that there was one announcement they had been concerned about – prompting speculation that it was the tax hike for landlords.
Ministers are likely to face further stinging criticism from their opponents this week over the spiralling benefits bill. The small print of the Budget revealed that the Government will be spending £8bn more on welfare by 2030 than had been forecast back in March, due to higher benefit uprating. Treasury sources have blamed rising inflation due to the war in Iran for the higher spending.
Defence Spending Row and Strategic Goals
Healey could also come under attack over defence spending. The Conservatives have claimed that the Ministry of Defence (MoD) budget is being cut by £1bn in day-to-day funding over the next two years, compared to what had been pledged in June. MoD sources said this claim was untrue, and that there was a “technical adjustment” equal to the amount departments no longer need to spend on pensions. Insiders stated this did not affect the MoD’s spending power or Nato targets, noting the department’s budget is rising from £68.4bn this year to £73.9bn the next.
Nevertheless, Labour chair of the Commons defence committee Tan Dhesi criticised the Chancellor’s “lamentable delay” in setting out a precise pathway to spending 3 per cent of GDP on defence by 2030. Meanwhile, Nato secretary general Mark Rutte welcomed the “clear path” to 3 per cent by 2030, a move financed through creative investment mechanisms including state-backed lending and a new defence financing taskforce.
