Healey introduces modest cost-of-living budget

The Burnham government enters its first full fiscal cycle with a focus on immediate household relief rather than long-term structural change. Chancellor John Healey is scheduled to present the budget in the Commons at 12:30pm on Wednesday, marking the first major economic statement of the administration.

The Treasury has characterized the package as a low-key affair, a description that aligns with the limited scale of the proposed measures. Healey frames the budget as a source of breathing space for low- and middle-income households, aiming to provide fresh hope for the future. Many of the proposals had already been briefed to the press, suggesting a deliberate strategy to manage expectations ahead of the formal announcement.

Constraints on spending power stem from both external pressures and internal political decisions. The ongoing conflict in Iran has increased borrowing costs, reducing the government's fiscal flexibility. Healey has explicitly rejected calls to raise capital gains tax or reduce the mansion tax, promising to maintain Labour's existing fiscal rules. Kiran Stacey, the Guardian's policy editor, described the budget as far smaller than last year's, noting it will not end 40 years of neoliberalism.

Specific measures target known household pain points, particularly energy costs. The government plans to abolish a rule that left unpaid carers in debt, a problem previously exposed by the Guardian. A series of everyday fixes is expected to include winter support for poorer families with energy bills, alongside broader market reforms designed to reduce costs over time. These initiatives aim to address the substantial pressure on consumer finances, with StepChange reporting that average arrears debt among its clients rose from £2,833 to £4,345 between 2022 and 2025.

Food prices will also see minor adjustments as the government removes import tariffs on items such as baked beans, chocolate, and gherkins. The Treasury estimates this change will save an average of £21 on the yearly food shop. While modest, this measure follows a May report from the Energy and Climate Intelligence Unit which found that UK food prices often remain elevated or fall slowly after crises.

Housing policy represents a more substantial financial commitment. Healey is expected to announce £1bn in additional funding for the biggest council housebuilding programme since the postwar era. Details on the Your First Home scheme, a successor to Help to Buy, are also anticipated. The Resolution Foundation notes that more than 900,000 private rented households on universal credit face a monthly gap between rent and housing allowance, averaging £158 for a family in a two-bedroom home. Local housing allowance has remained frozen since 2024.

The freeze on fuel duty, originally announced by Rishi Sunak in 2022, will continue. Jonny Marshall, an economist at the Resolution Foundation, argues that this freeze primarily benefits higher-income households who drive more, while costing the government revenue. He suggests that resources might be better allocated to helping poorer households through other means, particularly by increasing action on energy bills.