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John Healey cannot afford to make the one mistake Rachel Reeves avoided (Image: Getty)
Andy Haldane was chief economist at the Bank of England, so knows what he’s talking about. He’s just said that Healey must balance the books in his upcoming Budget or risk plunging Britain into a financial crisis. He also says the chancellor cannot do it by hiking taxes, which would be “disastrous” and risk “cratering growth”. Instead, Healey must do the unthinkable. At least, it’s unthinkable for a Labour chancellor working under this Labour PM. Haldane says Healey must “take the knife” to ballooning public spending.
Haldane no longer advises Burnham formally. Given that he recently accused Burnham of running up a “traditional tax-and-spend socialist government”, that’s hardly surprising. He isn’t the only one of Burnham’s advisers sounding the alarm. Former Goldman Sachs economist Lord Jim O’Neill has said another Budget tax raid would be “stupid”, damaging the growth Britain desperately needs. Now an even bigger cheese has waded in.
Bank of England governors normally steer clear of politics, but these are not normal times. Speaking to fellow central bankers yesterday, BoE governor Andrew Bailey warned that any government tax and spending plans must “be seen by markets as credible”. Bailey even invoked Liz Truss’s notorious 2022 mini-Budget, which sent borrowing costs soaring, and warned: “If markets begin to doubt the fiscal trajectory, bond yields can rise further.”
That’s as far as Bailey dare go. Tory shadow chancellor Andrew Griffith said the message was clear: “In central banker speak this is a clear warning to the government to get a grip on their debt-fuelled spending binge.”
It was a timely reminder, as yesterday 30-year UK gilt yields topped 6% to hit a new 28-year high. We can’t afford them to go any higher, but they almost certainly will. Especially if Healey goes on a spree.
Rachel Reeves was a disastrous chancellor. Her £66billion tax raids crushed business confidence, while her spending plans left Britain in hock to the tune of £130billion a year. But she got one thing right. She set out her fiscal rules and stuck to them.
Healey says he will do the same, but many on the left are demanding he abandon those rules, for the obvious reason that they stop him from chucking still more taxpayer cash at Labour’s pet projects.
When Healey told Labour’s conference that money was tight, party members fell silent. It was a message they didn’t want to hear. It’s one Burnham doesn’t want to hear either.
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The PM has already cut VAT on electricity bills, capped bus fares and signalled help for rough sleepers. He also wants to fund a big council house-building programme and sort out social care. All worthy aims, that cost money we don’t have.
A global financial crisis could turn nasty. Look at indebted France. They’re already rioting, even before it’s really got going. If the Iran war drags on and the oil price climbs, then inflation, gilt yields and Britain’s borrowing costs will rise still higher, destroying Healey’s wafer thin fiscal headroom. We could end up in the same mess as the French.
Reeves presided over two disastrous budgets, and Andrew Bailey couldn’t resist having a pop at her too. But she didn’t trigger a fiscal crisis, surge in gilt yields or run on the pound. If Healey falls through that thin ice, we could get all three.
But Healey isn’t just watching the bond market. He’s got one eye on a Labour Party that wants more tax, borrowing and spending, and a PM who keeps promising them just that. If Healey caves where Rachel Reeves didn’t, we’ll be screaming for her to come back. Well, almost.
John Healey Told to Get a Grip – His Budget Could Blow Up in Andy Burnham’s Face
Britain’s political debate over public spending is becoming increasingly complicated, with disagreements over defence, taxation and the future of public services threatening to create difficulties for senior Labour figures. John Healey faces pressure to demonstrate that the government’s financial commitments are realistic, while Andy Burnham could find himself caught in the political fallout if decisions made in Westminster undermine his own ambitions.
The warning that Healey needs to “get a grip” reflects a wider frustration with the challenges facing the government. Ministers are expected to deliver improvements to public services, strengthen national security and support economic growth, all while reassuring taxpayers that public money is being spent responsibly. Those objectives are difficult to reconcile when budgets are tight and every department is competing for limited resources.
For Burnham, the danger is that a national financial dispute could become a local political problem. His reputation and future ambitions depend partly on his ability to present a credible alternative to the government’s current approach. If the Budget creates new pressures for local services, councils or households, he could be forced to defend decisions over which he has little direct control.
The central question is whether Labour can maintain a consistent political message when its national commitments and regional priorities come into conflict.
Why John Healey Faces Difficult Questions
Any debate over a government Budget requires ministers to explain how their ambitions will be funded. In Healey’s case, the challenge is particularly sensitive because defence spending is closely linked to national security and Britain’s international responsibilities.
The armed forces need modern equipment, trained personnel, reliable infrastructure and the resources to respond to changing threats. These requirements cannot always be postponed without consequences. Defence programmes often involve long-term contracts, and decisions made today can affect military capability for years to come.
Yet the government must also consider the cost of living, pressure on public services and the need to encourage economic growth. Increasing funding for one priority can create difficult choices elsewhere, especially if the money cannot be found through stronger growth or savings in other areas.
Healey must therefore make a convincing case for the resources required by his department while acknowledging the financial limits facing the wider government. Simply insisting that defence deserves additional funding will not answer the Treasury’s questions about affordability.
Equally, any attempt to postpone difficult decisions could invite criticism from those who believe the country needs a clearer and more ambitious defence strategy.
The political risk is that ministers appear divided over priorities. If one department promises improvements while another warns that the money is unavailable, voters may question whether the government has a coherent plan.
That is why the demand for Healey to get a grip carries significance beyond one minister’s performance. It reflects the expectation that the government should make commitments it can realistically deliver, rather than allowing competing promises to accumulate until a Budget forces an uncomfortable reckoning.