Chancellor John Healey refused to rule out Healey Budget tax rises during his first major speech in Coventry, insisting he would ‘not speculate on questions of tax’ even as rising gilt yields pile pressure on the public finances ahead of the 28 October Budget. Healey framed growth as the country’s ‘sustainable pathway out of indebtedness and into prosperity’, but offered no comfort to businesses and households bracing for further levies.
Healey holds the line on tax while gilt costs climb
Pressed repeatedly by journalists on whether income tax, VAT or national insurance would rise in October, Healey pointed to Labour’s 2024 manifesto pledges ruling out hikes to all three. Beyond that, he declined to go further. ‘If I respond to those questions, I’m only going to fuel more speculation,’ he said.
The silence lands at a difficult moment for the Treasury. Analysts at Pantheon Macroeconomics and multiple City institutions believe tax rises are highly likely, as higher government borrowing costs and spending pressures on defence and welfare narrow the Chancellor’s room for manoeuvre. Reuters reported that the government’s budget watchdog estimated a one percentage point permanent rise in gilt yields would add £12 billion a year to government borrowing costs by 2029/30, a figure that illustrates how sharply the fiscal backdrop has deteriorated.
The pressure on gilts has been acute. The UK’s 30-year yield peaked at 5.246% in late London trade, the highest level since August 1998, according to Yahoo Finance/Reuters. The United Kingdom Debt Management Office sold £2.25 billion of benchmark 30-year gilts at an average yield of 5.198% at auction, the highest yield for a 30-year gilt since the DMO sold one at 5.790% at its first auction in May 1998. British 30-year yields have also been running more than 2.5 percentage points above German equivalents over the past month, a spread only exceeded during the market turbulence that followed Liz Truss’s ‘mini budget’ in September 2022.
Growth agenda and what Healey Budget tax rises could fund
Healey’s speech was built around growth as the fix for fiscal strain. He backed Sir Keir Starmer’s promise to cut business administration costs by 25 per cent by 2030 and announced planning reforms to boost nuclear energy production under the Fingleton Review. The government also said it would launch a review into railway costs and rewrite Treasury rules to give greater weight to long-term public infrastructure investment.
On innovation, Healey set a new target to double the number of unicorn startup companies in the UK. One index by Dealroom puts the current count at 205 companies valued at over $1 billion. Devolution, he added, would be central to the Budget’s design, with growth needing to reach ‘more places’ beyond London.
The speech comes as the first of several public appearances before 28 October. The Treasury set a Wednesday night deadline for business leaders to submit proposals. The British Chambers of Commerce (BCC) used the opportunity to urge the Chancellor to replace the triple lock pension and cut employers’ national insurance contributions for workers under 25 to address youth unemployment. The triple lock, which guarantees the state pension rises each year by the highest of wage growth, inflation or 2.5 per cent, was estimated by the Office for Budget Responsibility (OBR) to cost £15.5 billion a year in extra spending by 2030. Labour promised to keep it in its manifesto. The BCC is the only major industry body to call for it to be scrapped.
Healey acknowledged youth unemployment was a ‘blight’ on the country but said plans would follow a review by Alan Milburn, due to complete his work on joblessness later this year.
Shadow chancellor Andrew Griffith was unsparing. ‘Warm words about growth will not make growth a reality or cover up the enormous damage’ from previous tax rises, he said. Griffith accused Healey of failing to rule out further tax rises, failing to set out welfare reform, and failing to commit to defence funding, ‘the very issue he resigned over as defence secretary’. He also pointed to the carmaker that, as Healey finished speaking, confirmed it would cut around 4,000 jobs in a drive to remove roughly £1.7 billion from its cost base, arguing the Chancellor had offered no pause to employment regulation and no measures to reduce energy costs.
With the Budget seven weeks away and 30-year borrowing costs at their highest since 1998, the question of how Healey fills any fiscal gap is unlikely to stay speculative for long.
