Debt and interest payments are limiting the scope for Burnham’s first budget

 Yesterday, the Chancellor of the Exchequer, John Healey – who was appointed in July by the new Prime Minister, Andy Burnham – spoke in Liverpool at the Labour Party conference to outline the framework for the forthcoming budget, which is due to be presented on 28 October.

According to many analysts, her speech marked a change of tone. Healey, who served as Defence Secretary in Keir Starmer’s government until June – when she resigned, accusing the Treasury (which she now heads) of failing to allocate the necessary resources to the armed forces – is, following two months of announcements by Burnham, beginning to lay the groundwork for difficult decisions. “The funds that New Labour had in the 1990s simply no longer exist,” Healey said yesterday. “And there is nothing progressive about losing control of the accounts.” UK debt now stands at 93.8 per cent of GDP; in 1997 it was 37.2 per cent; and interest payments currently amount to around 3.6 per cent of GDP. Nevertheless, the Chancellor has promised a “new era of industrialisation”: £6 billion in contracts for shipyards; £100 million for a workplace apprenticeship scheme run by mayors; and the announcement of a £300 million investment by Rolls-Royce in the UK. As for how the planned expenditure – such as the £4.7 billion for the already approved defence programme – will be funded, the Chancellor has not yet revealed his hand.

At the same time, Healey gave assurances that the budget would comply with the rule stipulating that, by 2029–30, revenue must cover all current expenditure – from pensions to interest payments – whilst debt may only be used to finance investment. In March, official forecasts predicted a surplus over current expenditure of £23.6 billion for 2030, but with the rising cost of debt, the margin has fallen to between 8 and 12 billion, according to KPMG and the Resolution Foundation. On 28 October, Healey will have to reconcile Burnham’s pledges with the budget, and according to Bloomberg, the Treasury is considering an increase in the tax on capital gains from the sale of shares and a one-off levy on banks and oil companies.