Healey prepares UK for ‘really challenging’ Budget

{"text":[[{"start":9.36,"text":"Chancellor John Healey is preparing the UK for a painful Budget next month as global conflicts push up government borrowing costs and drive investor speculation of higher interest rates in the coming months."}],[{"start":21.48,"text":"Healey’s allies said wars raging in the Middle East and Ukraine were having a “significant impact on the economy”, with economists predicting that the chancellor’s current £24bn fiscal “buffer” will take a battering. “This is a really challenging Budget,” said one ally."}],[{"start":21.98,"text":"The Bank of England is widely expected to keep its key rate unchanged at 3.75 per cent on Thursday, but the prospect of inflation topping 4 per cent early next year has primed markets for a rate rise later this year."}],[{"start":22.48,"text":"Andy Burnham, prime minister, also said the fallout from the wars would make for a “challenging” Budget, amid warnings from a former adviser that markets are suspicious of his ability to keep public spending under control."}],[{"start":26.28,"text":"Conservatives seized on the appointment of Paul Nowak, head of the Trades Union Congress, to the Bank of England’s Court of Directors as evidence of a leftwing economic takeover."}],[{"start":26.78,"text":"“The last thing our country needs is a trade union leader helping to run the Bank of England,” said shadow chancellor Andrew Griffith."}],[{"start":null,"text":"

"}],[{"start":27.28,"text":"Griffith did not mention that Nowak replaces previous TUC boss Frances O’Grady, who was appointed in 2019 by then Tory chancellor Philip Hammond. Trade union leaders often sit on the central bank’s court as non-executive directors."}],[{"start":27.78,"text":"Healey, a former defence secretary, has told colleagues that international factors are weighing heavily on his Budget planning, including the advance of Houthi rebels on the Red Sea coast of Yemen and the escalation of fighting in Ukraine."}],[{"start":26.28,"text":"“Both of these fronts are having a significant impact on the economy,” said one ally of the chancellor. “John knows this better than anyone with his international outlook from defence and is using it as a basis for some early thinking into the Budget.”"}],[{"start":34.64,"text":"Meanwhile, Burnham hit back at claims from Andy Haldane, former BoE chief economist and a one-time adviser, that markets suspected the prime minister was leading “a traditional tax-and-spend socialist government with better TikTok videos”."}],[{"start":48.56,"text":"Burnham told reporters that Haldane’s comments to LBC did “not tell the story — we are not that”."}],[{"start":54.64,"text":"“Already I’ve taken difficult decisions in this job to reprioritise government spending, putting digital ID on hold for instance,” he said, adding: “We will take difficult decisions to make sure the economy remains on track.”"}],[{"start":68,"text":"The BoE’s Monetary Policy Committee will on Thursday set out the reasoning behind their latest interest rate decision at midday, when investors expect policymakers to keep rates at 3.75 per cent with UK inflation set to rise above the 3.1 per cent reached in August."}],[{"start":84.84,"text":"Speculation about further increases in policy rates in the UK and other economies including the Eurozone and US has contributed to a sell-off in government bonds, driving up UK government interest costs. The US on Wednesday raised rates for the first time since 2023 by a quarter point to a 3.75 per cent to 4 per cent range."}],[{"start":105.68,"text":"This has sharply curtailed the budget “headroom” that Healey has against his key fiscal rule. Many forecasters estimate the impact of higher borrowing costs alone has halved the fiscal buffer from the near-£24bn that Rachel Reeves, the former chancellor, had in March."}],[{"start":122.28,"text":"The key fiscal rule requires the UK government to bring the current budget, which excludes investment spending, into surplus by the end of the parliament."}],[{"start":130.88,"text":"The Office for Budget Responsibility is currently working on the forecasts that will underpin the October 28 Budget. Unlike in previous Budget rounds, the OBR is only set to provide a single economic forecast to the Treasury in the lead-up to the fiscal event."}],[{"start":145.84,"text":"Previously, the OBR provided three sets of “pre-measures” forecasts but the November 2025 budget was riven by speculation over how those private outlooks were changing, adding to the turbulence in the lead-up to Reeves’ final Budget as chancellor."}],[{"start":161.28,"text":"UK borrowing costs reached above 5.4 per cent earlier this week, touching their highest level since 2007, in a global bond sell-off triggered by the Iran war. They eased slightly to just above 5.3 per cent on Wednesday."}],[{"start":177.32,"text":"The bond sell-off has been especially painful for Britain, which went into the conflict with the highest borrowing costs in the G7 due to sticky inflation, elevated borrowing and other factors."}],[{"start":189.04,"text":"It has come at a brutal time for Healey given the OBR’s so-called observation window — when it takes a snapshot of market rates to feed into its forecast — is thought to be open."}],[{"start":199.6,"text":"The BoE is expected to further slow down the pace at which it is shrinking its gilt holdings, bought during recent crises, with some expecting it to pare back or stop its sales of long-term bonds to help support the under-pressure gilt market."}],[{"start":213.32,"text":"Alongside the dim view of the UK’s finances among global bond investors, the government also postponed a global investment summit scheduled for December in London. The last event had attracted over £60bn of investment commitments."}],[{"start":227.64,"text":"Additional reporting by Ashley Armstrong"}],[{"start":233.38,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1789617924_2863.mp3"}