Badenoch Warns Healey's Budget Could Exceed Reeves' Economic Damage

Conservative leader Kemi Badenoch is set to warn that Chancellor John Healey's upcoming Budget could inflict more economic damage than the two Budgets previously delivered by Rachel Reeves. Badenoch plans to argue that Healey must significantly reduce government expenditure to ensure fiscal responsibility, despite Labour having already increased the tax burden to a post-war high.

In a speech, Badenoch is expected to state that Healey's proposals for public spending cuts to balance the national accounts are "fictional." She anticipates that these measures will never be implemented because the Labour government will call a general election before the end of the parliamentary term. "Labour's deficit reduction plans to meet their fiscal rules are predicated on making huge cuts to the public sector in the final year of the spending period," she will say. "I think there will be an election before then and they'll never have to prove it."

Badenoch intends to highlight warnings from the Institute for Fiscal Studies (IFS), which suggested Healey's Budget might be a "work of fiction" if it does not detail specific spending reductions. The IFS noted that if the Chancellor intends to increase military spending without cutting departmental budgets, he would need to implement tax rises or welfare cuts totaling approximately £35 billion. Bank of England Governor Andrew Bailey has also emphasized the need for a "credible" Budget to reassure financial markets, especially after government borrowing costs reached their highest level since 1998.

Badenoch will acknowledge that global events, such as the wars in Ukraine and Iran, have contributed to rising bond yields worldwide. However, she will point out that the UK's borrowing costs are higher than those of other leading G7 economies. "We have to stop borrowing so much," she will state. "But instead of doing that, Labour are taking out loans to pay the interest on our loans."

She will advocate for reduced government spending, referencing that her party has identified over £70 billion in potential immediate cuts. Healey's Budget is anticipated to include measures to support low-income households with rising energy costs and to extend the fuel duty freeze. There are also predictions of a tax increase on banks, despite the Chancellor having recently referred to them as a "jewel in the British economic crown."

Additionally, reports indicate that Healey is considering changes to how family businesses are passed down. This could involve levying income tax on entrepreneurs when they convert their holdings into "redeemable shares," a shift from the current Capital Gains Tax system. Such a change could result in a business owner paying significantly more tax upon such a transaction.

A Labour spokesperson responded to Badenoch's remarks by stating that the Conservatives have "zero credibility on the economy" and criticized her appointment of Andrew Griffith, whom they described as the "architect of the economy-crashing mini-Budget," as her Shadow Chancellor.