John Healey, the chancellor, is delivering his first budget a week tomorrow, and this morning there are two news developments that will help to frame the way it is received. The most important is on the front page of the Times, where Steven Swinford has a story firming up that has already been hinted that: that Healey has decided not to raise capital gains tax in the budget. This is significant because a capital gains tax hike was for a while seen as the government’s preferred money-raising ploy, not least because several senior figures in the cabinet were lobbying for one earlier this year.
But now it is off the table, according to Swinford. He says: Senior allies of Andy Burnham, including several cabinet ministers, have been pressing for a rise in capital gains tax on the sale of second homes, shares and other assets to help repair the public finances. However, the chancellor has ruled this out after warnings that it could ultimately cost the government money if wealthy individuals left the UK or deferred selling assets … It means that the biggest “revenue raiser” in the budget will be a tax raid on banks, which will be used to help fund a targeted and temporary package of support on the cost of living.
Healey will also reduce the government’s fiscal headroom — a buffer against future events — from £23bn to around £15bn. There is a Whitehall myth about how the Treasury never gives out detail about what’s coming in the budget before it is actually announced. In fact, on certain issues, the Treasury regularly ensures that the media gets an accurate picture of what is coming in a budget to minimise the risk of the markets getting an unwelcome surprise.
This is done not through on-the-record statements, but via murky background nods, winks and hints. That has been happening overnight, with journalists being assured that the Times’ story is accurate. The second intervention is coming from Kemi Badenoch, the Conservative leader.
In a speech this morning, she will claim that Healey’s budget will be even worse than the two delivered by Rachel Reeves, which raised taxes by £40bn and £26bn respectively. That is because Healey is not cutting spending, Badenoch will say. She will argue: How could it be worse than £70bn 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’ budgets did. We are being told that next week’s budget is going to be “nothing to see here”. That is code in Whitehall for a budget that tries to do as little as possible … in the hope that no one notices.
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