John Healey has to be an improvement on Rachel Reeves. His predecessor drove tax and spending to the stars, and left us on course to borrow £130billion this year. Both her Budgets triggered fury and confusion in equal measure. So far, Healey has kept the lid on speculation, but his Budget is shaping up to be a disaster anyway. That’s not wholly his fault. But he’ll still take the rap.
His first problem is boss Andy Burnham. Our new PM just wants to be loved. And as a Labour leader, the surefire way of doing that is to throw the cash around. Lower bus fares, energy bill support, rough sleeping initiatives, more council houses, a solution for social care… It’s all vote-winning stuff. But it costs money. And as Burnham made clear in Parliament, he won’t lay a finger on our spiralling welfare budget.
Healey has another problem, also not of his making. Thanks to Donald Trump’s misfiring war in Iran, oil prices are soaring and so is inflation. That’s driving up government borrowing costs and putting the nation’s finances on a knife-edge. In August 2024, weeks after Keir Starmer’s landslide, 10-year gilt yields slipped below 3.8%. As I started writing this article, they stood at 5.3%. Right now, they’re at 5.4% and still climbing. That’s the highest since 2007. Under Calamity Liz Truss, they peaked at 4.5%, and we know what happened to her.
Higher gilt yields are a disaster because they drive up the cost of servicing our national debt.
It took 300 years for our national debt to hit £1trillion, in 2010. It took 10 years to hit £2trillion, and just six years to hit £3trillion. That’s a terrifying procession. By the end of this Parliament, we could already be at £3.5trillion.
Bond investors look at that. Then they look at Andy Burnham. And realise he’s not the man to make the tough decisions required to cut spending, reduce the deficit or shrink the national debt. So they either demand we pay still more interest, or refuse to lend at all.
Healey inherited fiscal headroom of about £24billion from Rachel Reeves. That’s now shrunk below £10billion. That isn’t his fault either, but he has to find the solution. And it won’t be popular.
And here’s the big problem. Healey is chancellor of a party that only wants to tax more and spend more. And that is the last thing he must do. Taxes are as high as the economy can stand. So is spending. He must target that debt. It’s the only way to stop borrowing costs from running out of control. The IMF is scared stiff and begging us to take action.
But Healey knows Labour will hate him forever if he even tries. The party has descended into fantasy economics, blended with class warfare, just as it did in the 1970s. They wouldn’t listen to the chancellor then. His name was Healey too. Denis Healey. And it all ended in chaos on his watch.
John Healey’s Budget is descending into hell and being a safe pair of hands isn’t enough. He needs to get a grip. Both on the Budget, and the Labour Party. Best of luck.
