Healey to pitch first Budget at entrepreneurs as welfare reform looms

Chancellor John Healey is preparing to deliver his first Budget, with the government expected to include welfare reform and a deregulatory pitch to business as it tries to control the benefits bill and support growth. The Budget is due on Wednesday, with the run-up dominated by welfare reform and competing messages on the public finances.

Liz Kendall, the former work and pensions secretary, told the Electoral Dysfunction podcast that getting more people into work was a moral duty and the right way to slow the rising cost of the welfare bill. She said good work was good for people's dignity, self-worth, independence and mental health, and helped businesses draw on all the country's talents. She added that too many people had been denied chances and choices to work, and that she backed Healey's approach. She also said the welfare review would need to find savings to help the spending review and was a good path to bring down cost growth because the growth in the bill was too much.

Ahead of the Budget, the Times reported that Healey would pitch the Budget at "bloody-minded entrepreneurs", pledge to cut regulations, want start-ups to stay in Britain and give an impassioned defence of the profit motive. The Financial Times reported that UK inflation and borrowing had topped forecasts, a blow ahead of the Budget that cemented expectations of Bank of England rate rises in November.

Economists said the economy had shown resilience rather than stagnation, with annualised growth of more than 2.5% over the first eight months of the year, the strongest such period since 2017 excluding the pandemic bounce back. But that strength had not fed through into the public finance numbers. Borrowing figures were disappointing and inflation came in higher than expected. Analysts questioned whether the third quarter was a delayed reaction to the energy shock or a sign of underlying change. Consumer confidence had improved, with households saving less and spending more over summer, but gas prices had risen and were due to rise further in January.

The government has set a medium-term fiscal destination but has not set out all the detail of how it will get there. Kemi Badenoch used PMQs to say the government was not serious about balancing the books because it had not provided that detail. Market analysis suggested the UK's borrowing premium had narrowed recently, partly because France and the US were perceived to be doing worse. The IMF last week gave unexpected praise for the government's deficit reduction plan, with projections showing the deficit falling between 2025 and 2031 while it was barely falling in France and Italy and rising in Germany, the US and Japan. But the Budget will need to flesh out the plan, with spending tight over the next few years, public sector pay demands of 3.5% unfunded and inflation eroding departmental budgets.

Political debate turned on whether the government's inheritance was strong or weak. One panellist said it was too early for high fives given higher inflation and borrowing costs, and argued that national insurance rises on business, the employment rights bill and the minimum wage increase had pushed policy in the wrong direction. Another pointed to stronger growth, a plan to reduce reliance on fossil fuel imports from foreign dictators, and measures intended to bring inflation and interest rates down. The common question was whether Healey can use the Budget to show that the government's plan is credible and that spending and welfare reform add up.