John Healey will fund the new measures in his first budget through higher taxes or spending cuts, not extra borrowing, the Financial Times reported on Wednesday, citing people briefed on preparations. The budget lands on October 28, 14 days from today.
The paper said the package will be “scorecard positive” in 2029/30, the parliament’s final year. In plain terms, any extra discretionary spending will be fully funded by then. That matters: the UK ran a budget deficit of 4.4% of GDP last year, and the government’s self-imposed rules require tax revenues to cover day-to-day spending, while debt falls as a share of GDP.
The Fiscal Picture
The room for manoeuvre has narrowed. According to the report, the Iran war has put more pressure on Britain’s public finances, leaving Healey with less headroom after he meets the fiscal rules. Rather than spend what remains, the finance minister is expected to keep it back as a “contingency fund” for periods of economic stress.
“This will be the chancellor’s way of demonstrating fiscal responsibility,” one person briefed on the budget told the FT.
There’s a cost-of-living element, too. Healey is expected to introduce targeted help with higher winter fuel bills and drop plans to raise fuel duty by 3 pence a litre in January and 2 pence in March. Targeting, not blanket support, is the stated approach. The tension is clear: relief for households must be paid for somewhere, and the report points to taxes or cuts.
A Treasury spokesperson put it this way: “The Chancellor has been clear that fiscal discipline underwrites every promise this Government makes, which is why he and the Prime Minister are in lockstep on meeting the fiscal rules.” The spokesperson added that his focus is “on backing British jobs, giving families and businesses breathing space and driving growth in every postcode.”
The IMF Weighs In
Outside validation arrived this week. The IMF backed Britain’s fiscal strategy and urged it to “stay the course” rather than speed up deficit reduction. It contrasted Britain’s approach with that of other big economies, which have few or no plans to reduce borrowing as interest rates rise.
The endorsement comes with a sting. Bloomberg’s UK newsletter headline said the IMF wants the government to explain how it will fund higher defence spending. It described the Fund’s message ahead of the budget as: “it’s time to level with the public.” Who pays for defence, and through which taxes or cuts, remains an open question.
What Reform Looks Like
The sequence is worth watching. A government promising fully funded measures, keeping a reserve for shocks, and shelving a fuel-duty rise is trying to hold three commitments at once: discipline, relief and resilience. Whether the numbers support all three will only be clear when officials publish them on October 28.
Why This Matters:
Britain’s borrowing rules test its credibility with lenders and voters alike. A 4.4% deficit leaves little cushion, and the Iran war has already eaten into the headroom the Treasury hoped to keep. Funding new support through taxes or cuts, rather than debt, is what a fiscally cautious observer would want to see, but it shifts the burden onto households and businesses facing high fuel bills.
The IMF’s call to explain defence funding points to the harder choice ahead: security spending has to be paid for openly, and the public has so far been told little about the trade-offs. Other European governments facing rising rates and rising defence commitments will be watching how London squares that circle.