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

Conservative leader Kemi Badenoch is set to warn that Chancellor John Healey's first Budget could inflict more damage on the economy than the two delivered by his predecessor, Rachel Reeves. Badenoch plans to argue that despite Labour having already raised the tax burden to a post-war high, Healey's upcoming statement risks further harm.

In a speech, Badenoch is expected to state that Healey, despite potentially wishing to avoid major changes to taxation and spending, must reduce government expenditure to ensure fiscal responsibility. She will brand Labour's current proposals for public spending cuts as "fictional," predicting that the party will call a general election before these cuts need to be implemented.

"John Healey is not Rachel Reeves. Many people see that as an improvement. How could it be worse than £70billion in new tax rises across just two Budgets? However, I'm worried that next week John Healey will deliver a Budget that does more damage to our country than either of Rachel Reeves's did," Badenoch is anticipated to say.

She plans to assert that while discussions in Westminster and Whitehall suggest a "nothing to see here" approach to the upcoming Budget, Britain "cannot afford to do as little as possible." Although the International Monetary Fund (IMF) recently praised Labour's plan to reduce the budget deficit, Badenoch will claim it relies on "made-up spending cuts."

"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. I think there will be an election before then and they'll never have to prove it," she is expected to state, adding, "Labour have increased spending by more than £100billion in just two-and-a-bit years. They are not suddenly going to find some courage to cut spending in the final year of a Parliament right before an election."

Badenoch intends to reference a warning from the Institute for Fiscal Studies (IFS) that Healey's Budget could be a "work of fiction" if spending cuts are not clearly outlined. The IFS noted that if the Chancellor intends to increase military spending and avoid cutting departmental budgets, he would need to implement tax rises or welfare cuts totaling £35 billion.

Bank of England Governor Andrew Bailey has also emphasized the need for the Budget to be "credible" to reassure financial markets, especially after government borrowing costs reached their highest level since 1998. Badenoch will acknowledge global factors like the wars in Ukraine and Iran contributing to increased bond yields but will highlight that the UK's borrowing costs are higher than other G7 nations.

"We have to stop borrowing so much," Badenoch plans to say. "But instead of doing that, Labour are taking out loans to pay the interest on our loans." She will advocate for reduced spending, pointing to her party's identification of over £70 billion in potential immediate cuts.

Healey is reportedly planning to leave approximately £15 billion in fiscal headroom, a decrease from the £23 billion left by Reeves, in an effort to avoid unsettling markets. The Budget is anticipated to include measures to assist low-income households with energy costs this winter and an extension of the fuel duty freeze.

Despite the Chancellor referring to banks as a "jewel in the British economic crown" recently, a tax increase on the banking sector is predicted. Reports also suggest Healey is considering a change to how family businesses are passed down, potentially levying income tax on retiring entrepreneurs when they convert holdings into "redeemable shares," rather than Capital Gains Tax, which could significantly increase the tax liability for business owners.

However, the Budget is not expected to allocate new funding towards the Prime Minister's initiatives to combat youth unemployment.

A Labour spokesperson responded to Badenoch's remarks by stating, "The Conservatives have zero credibility on the economy. After appointing the architect of the economy-crashing mini-Budget [Andrew Griffith] as her Shadow Chancellor, Kemi Badenoch should spare everyone the lecture."