Healey's First Budget: Bank Levy, Energy Help and Cost of Living Measures Expected

John Healey will deliver his first budget as chancellor on Wednesday, an event that will set the tone for Andy Burnham's premiership. Healey had promised in the summer to avoid the leaks that dogged the budget of his predecessor, Rachel Reeves, but official and unofficial sources have nonetheless pointed to much of what he is likely to announce.

The chancellor will allocate about £1.42tn this year to day-to-day spending and public investment, with roughly £100bn of that going on debt interest after the rate the government pays rose to multidecade highs. Most of the increase is blamed on the Gulf conflict launched by the US and Israel at the end of February, which has pushed oil above $110 a barrel and gas to prices not seen since late 2022.

Borrowing this financial year has fallen compared with 2025-26, but by less than the Office for Budget Responsibility estimated in March, mainly because of higher debt financing. Healey is spending about £1bn a month more than forecast. The Resolution Foundation thinktank expects the £24bn buffer built up in the last tax-raising budget to have halved to £12bn, while economists at ING say the Treasury would prefer headroom of about £15bn.

Healey has promised consumers and businesses "breathing space". Measures include extending parental pay, worth £388, to more than 150,000 additional parents a year, including self-employed fathers and partners who previously missed out. He will also end the carer's allowance cliff-edge and remove import tariffs on more than 100 products, among them baked beans, chocolate and gherkins.

More than £1bn is planned to help poorer households with energy bills, mostly through an expanded Warm Home Discount. A further £100 could be added to the £150 means-tested annual rebate, funded by taxes rather than by billpayers. Burnham has already suspended VAT on electricity bills for six months, and gas standing charges are now expected to be scrapped. The budget will also detail the "your first home" scheme, a revamped version of the Tories' help to buy that offers first-time buyers a 20% equity loan on a new-build home, with a minimum deposit of 2.5%.

On defence, Healey aims to close a £4.7bn gap in the investment plan inherited from Keir Starmer, with cuts to other departments the likely source of funds. A roadmap for reaching 3% of GDP on defence by 2030 will not arrive until next year's spending review.

Healey cannot raise income tax, national insurance or VAT without breaking manifesto pledges, and has promised to keep to Reeves's fiscal rules. The main revenue-raiser is expected to be a levy on banks, whose resistance has been weakened by bumper profits. HSBC reported on Tuesday that its profit had risen 32% to about £7.2bn. One option is reversing Jeremy Hunt's cut in the bank surcharge from 8% to 3%, raising more than £2bn a year.

Online marketplaces such as Amazon and eBay may also face higher taxes, after lobbying from Labour backbenchers and unions. One reported proposal would raise up to £1bn by making them collect VAT for large UK-based and overseas sellers. The money could fund a rise in the business rates threshold for small high-street shops from £12,000 to £18,000. Alcohol duty is likely to rise in line with RPI, lifting the tax on a pint from 50p to 52p.

Several taxes are expected to be left alone. Treasury officials have played down changes to the mansion tax, and London MPs are confident a lower £1.5m threshold has been ruled out. Healey has rejected calls to align capital gains tax with income tax, and Labour is not expected to propose inheritance tax changes. The fuel duty freeze is expected to continue given near-record pump prices, though a further year could cost up to £2.7bn according to the Institute for Fiscal Studies.

Devolution, central to Burnham's growth plans, will receive a £150m boost for mayoralties and local authorities, a £1.5bn borrowing facility and an initial £285m in "good growth" funding next year. Healey is also understood to have scrapped plans for a golden visa route for wealthy overseas applicants.