After weeks of leaks and rumours, John Healey will stand up in the Commons today to deliver his first Budget as Chancellor.

It is also the first real test of Andy Burnham’s premiership.

Three months after Burnham replaced Sir Keir Starmer as Prime Minister, the question is simple: can Healey convince voters, and a restless Parliamentary Labour Party, that the upheaval of changing the Government was worth it?

The Treasury has worked hard to lower expectations, pitching this as a relatively low-key Budget. The biggest spending decisions have reportedly been pushed into next year, and Healey has warned that the money New Labour had in the 1990s “is simply not there now”.
But managing expectations is not the same as meeting them.

Labour MPs who backed the change at the top will want to see evidence that the new Prime Minister and Chancellor can offer something different from their predecessors. And voters struggling with the cost of living will want to know what, if anything, the change means for them and their pockets.

Healey is boxed in. Borrowing costs have risen, leaving economists estimating the Government’s headroom against its fiscal rules at between £8.5bn and £16bn. Labour’s manifesto rules out raising income tax, employee national insurance or VAT. That leaves the Chancellor with limited room to raise money, and even less to fund the kind of tax cuts that might make an immediate difference.

The main revenue-raising lever is expected to be the banking sector. Reversing Jeremy Hunt’s cut to the bank surcharge could raise around £2bn a year.

Banks have warned against further tax increases, while Labour MPs and unions argue that the sector can afford to contribute more.

The Conservatives expect a smorgasbord of relatively small measures, each costing a few hundred million pounds. That may suit a Treasury keen to preserve its fiscal headroom, but it risks leaving the Chancellor without a headline.

The big question is whether Healey will raise the personal allowance. From April, the full new state pension is forecast to rise above the £12,570 income-tax threshold for the first time.

Ministers have promised that pensioners living solely on the state pension will not pay tax on it, but have yet to explain precisely how they will deliver that pledge.

Who will Burnham’s feel-good pitch extend to?

Will Healey confine the help to pensioners, or will Burnham’s feel-good pitch extend to workers too?

Raising the personal allowance to just over £13,000 for everyone would cost an estimated £4bn. It would be an expensive decision in a Budget where every pound matters, but it could give Healey the defining announcement he needs: a tax cut that reaches far beyond one group of voters and offers a tangible sign of change.

It would also echo the coalition’s approach during austerity, when the personal allowance rose from £6,475 in 2010–11 to £10,600 in 2015–16.

Healey could also reverse some of Rachel Reeves’s deeply unpopular rise in employers’ National Insurance. Before becoming prime minister, Burnham said the burden on employers was “not the right decision” and expressed sympathy for reconsidering the increase.
But any reversal would come at a cost, forcing Healey to decide how much he could afford to give back.

The question of defence

Then there is defence. Britain is committed to spending 3 per cent of GDP on defence by 2030, a target the Office for Budget Responsibility estimates would require an additional £17.3bn. Healey, a former Defence Secretary, faces pressure to set out how the Government intends to meet that commitment, even if the details of how to pay for it are left until next year.

That is the dilemma at the heart of this Budget. Burnham has raised expectations of change, but the Chancellor is operating within the same fiscal rules and manifesto commitments that constrained his predecessor.

The Government can offer smaller measures, defer the big decisions and hope the public gives it more time. Or it can take a more ambitious step and accept the financial risk.

By the end of the day, the question will not simply be whether Healey has announced enough to satisfy Westminster’s appetite for a Budget-day surprise.

It will be whether he has given Burnham’s premiership a convincing sense of direction and the type of defining story that alluded Starmer’s government.