Labour figures express private concerns over John Healey's first budget approach

Senior Labour figures are privately voicing unease about John Healey’s approach to his crucial first budget this month, against the backdrop of volatile global markets and soaring energy costs.

The chancellor’s work has been made significantly harder by the global bond sell-off, which continues to raise the cost of government borrowing, and ever increasing energy prices as Donald Trump continues the US war with Iran.

The yield – in effect the interest rate – on 30-year UK government bonds hit 6% on Thursday for the first time since 1998. Barclays raised some of its mortgage rates for the second time in a week, underlining the impact of these market moves on UK borrowers.

The chancellor’s party conference speech, which centred on the theme of reindustrialisation, was warmly received by Labour members in Liverpool. But government insiders and other Labour figures cast doubt over the lack of detail about policy on investment and growth or any pitch-rolling for possible tax rises.

One senior Labour politician said: “I missed any real sense of growth and investment, which Rachel [Reeves, the former chancellor] often emphasised, despite her faults – when business leaders speak to me, that’s what they were waiting to hear, and we got nothing.”

A Labour MP lamented the fact that on tax and spending Healey had gone little further than reiterating the fiscal rules. “It was Rachel’s speech delivered by John,” they said.

One senior Labour insider said they believed the chancellor was risking a fresh market shock on 28 October if he was not willing to be clearer about his approach to taxation, headroom and spending.

Market moves since the spring are expected to have wiped out at least half of the £24bn “headroom”, or buffer, Reeves had built up against Labour’s fiscal rules.

Healey is believed to be minded to accept a slimmer margin, but he gave no indication of his likely approach in his speech, aside from repeatedly stressing the need for discipline. Rebuilding the headroom in full could require significant tax increases or spending cuts.

Prof Arun Advani, the director of the centre for the analysis of taxation at Warwick University, said: “The chancellor didn’t give us a sense of how he’s thinking about these issues. It was a speech where at the end of it we didn’t come away understanding more about the direction of policy, or what he wants to do with the Treasury.”

There are concerns, too, about how Healey will tough out demands to say when the UK will spend 3% of GDP on defence – having resigned as defence secretary three months ago over the issue.

Treasury sources stressed that Healey was intimately involved in some of Andy Burnham’s significant conference announcements, with 40 officials working at the department through the weekend on the details of the triple lock pension reforms.

They also pointed out that the chancellor opened the door to a renewed attempt to reform welfare for the young unemployed – a fraught issue for Labour – and stressed his determination to present an optimistic picture of the UK economy.

Healey’s team are committed to avoiding the rollercoaster of leaks that happened in the run-up to Reeves’ budgets, particularly last year.

The Treasury team have initiated military style “black boxes” – learned from Healey’s time in the Ministry of Defence – for different teams to work within to avoid accidental leaks.

They also remain committed to what one called a “tightly focused” budget, though they concede that offering voters more “breathing space” on energy costs has become more urgent.

The narrow focus of the statement is expected to rule out radical reforms to property and capital gains taxes previously mooted by Burnham supporters including the first secretary, Louise Haigh; though reports that Healey is calling in bank bosses next week has reignited speculation of a windfall tax on the sector.

Labour MPs fear that failing to take more drastic action, particularly on surging energy prices, could leave voters non-plussed. One MP said: “The budget is only a few weeks away. He may want it to be low key but it will send a massive signal of our intent.”

Others are concerned that Burnham’s focus on long-term issues such as social care and public ownership of utilities will suck up political airtime without helping with the immediate crisis.

Alfie Stirling, the director of policy and insight at the Joseph Rowntree Foundation, said: “The focus on ‘room to breathe’ now, alongside the focus on taking greater control over the costs of essentials over the longer term, is the right strategy for government. But families are currently facing the worst parliament on modern record for real incomes and they simply cannot wait three years for government to grip this in the here and now.”

Several Labour figures pointed to Burnham’s last minute decision to appoint Healey as one factor making the chancellor’s job harder, giving him little time to build up an effective team before the budget.

Rav Athwal, an economist and the author of Labour’s 2024 manifesto, has only just joined Healey as a senior special adviser. Reeves’s chief economic adviser, Neil Amin-Smith, was poached by No 10.

One Treasury insider said: “He’s slow to get through his boxes and it’s hard to get meetings in the diary because he needs time to prepare before each one. It all feels a bit underpowered.”

But another Labour figure defended him: “John got virtually no notice he was getting this job. He’s not an economist. He didn’t have two years in opposition to prepare. It’s early days and the Treasury is there to support him. He’s very capable – just give him time.”