Shadow Chancellor sets five key tests for Healey ahead of crucial Budget

• Shadow Chancellor calls on Labour to cut spending and cut taxes so the pressure on families and businesses is eased.
• Conservatives accuse Labour of kicking the can down the road and dodging difficult decisions after reports that both the Millburn Review, into Young People and Work, and the Spending Review will be delayed.
• Conservatives argue that Labour is putting party before country by avoiding difficult choices on welfare.

Shadow Chancellor Andrew Griffith has today [Sunday 11^th October 2026] set out five key tests for Chancellor John Healey ahead of a crucial Budget in two weeks' time that is set to define the years ahead. 

As the state of the economy deteriorates, the threats to our country increase and the welfare bill spirals out of control, it is critical that in his first Budget, Healey avoids the terrible mistakes of his predecessor Rachel Reeves, whose tax, spend and borrow doom loop has left our economy on the brink. 

At the Budget Healey must:

• Stop maxing out the nation's credit card. Labour must cut the deficit to live within our means. Labour is already set to borrow £260 billion more over this Parliament than the plan it inherited. Will the Budget, as a minimum, keep the £23.6 billion of headroom against the Government's fiscal rules?
• Properly fund defence. When he resigned as Defence Secretary in June, John Healey wrote that "a headmark date for 3 per cent of GDP on defence in 2030 is what Britain must set". Will he find the backbone to deliver the funding in full now he holds the purse strings, or kick the can down the road and leave Britain without the defence it needs? 
• Act on the youth jobs emergency. With three quarters of a million young people unemployed, will the Chancellor take real action to get young people off welfare and into work, such as by cutting the Jobs Tax for under 25s?
• Introduce no new taxes. Labour's first two Budgets raised taxes by £66 billion and put the tax burden on course for the highest level ever recorded. Will the Chancellor stop the tax ratchet, with no new taxes, no higher rates and no new stealth taxes, or will he repeat the same mistakes? 
• Cut the welfare bill. Will Labour finally face down its own backbenchers and tackle the ballooning benefits bill? The Department for Work and Pensions forecasts that between Labour taking power and 2030, working age welfare will have increased by £51 billion. This is not sustainable.

These tests will show whether Andy Burnham and his Chancellor have learned from Labour's failures in Government to date or are about to repeat them. 

The tests come after a week of warnings about the public finances. 

• On Thursday, the Governor of the Bank of England told an audience of central bankers that, with bond markets under strain around the world, governments must show they can repair their public finances, and that whatever the stance of fiscal policy is, it must be credible and directed at stability. It was reported as a warning to Healey about the need to stop increasing spending, relying on borrowing at higher and higher costs, and instead urgently find ways to grow the economy.  

• Meanwhile Andy Haldane, an informal adviser to Burnham, said the Government is skating on pretty thin ice and that the best way to avoid falling through it would be to demonstrate a willingness to take the knife to public spending, which he referred to as the Achilles' heel of this Government. He added that the private sector feels taxed out in a warning against further hikes. 

• And former Burnham advisor Jim O'Neill said in a Financial Times interview that Healey must not do any harm to the economy by raising taxes, including by hiking Capital Gains Tax or launching a raid on the banks.

Last week, EY warned that the Chancellor's buffer against his own fiscal rules has more than halved since March, from £23.6 billion to around £11 billion, as higher energy prices and borrowing costs bite. Its chief economist noted that taxes are already forecast to reach record highs as a share of GDP. The Financial Times also estimates the Iran war has blown a £12 billion hole in the fiscal headroom.

So far, Burnham and Healey have declined to confront the growing economic chasm staring them in the face, preferring instead to make yet more expensive promises with no plans for how to pay for them. 

The Conservatives, in contrast, have set out our own plans to save over £70 billion, including £36 billion of savings from welfare, with £35 billion allocated to cutting the deficit. We will cut taxes on businesses and families, get people into work and slash the red tape that is stopping growth. We are the only party with a plan to deliver a stronger economy and stronger country, and get Britain working again. 

As a result of the Conservatives' Savings Plan the Shadow Chancellor has set out fully-funded plans to:

• Abolish Stamp Duty on every family home
• Scrap the so-called Mansion Tax' - the Family Homes Tax
• Ensure every home is always free of Inheritance Tax
• Reverse in full the Family Farm Tax and the Family Business Tax
• Cut Business Rates for the High Street, so thousands of businesses pay no rates at all 
• Halve the Jobs Tax for Young People
• End the Childcare Cliff Edge, so work always pays

Andrew Griffith MP, Shadow Chancellor of the Exchequer, said: 

Labour's first two Budgets put taxes on course for the highest level ever recorded, and families and businesses are continuing to pay the price. John Healey must deliver a get a grip' Budget, instead of kicking the can down the road.

These tests are simple, and Labour have already set one themselves. When he resigned as Defence Secretary, John Healey said that 3 per cent of GDP on defence spending is what Britain must set'.

To make Britain prosperous again, the Conservatives will cut over £70 billion of spending to allow us to cut taxes and reduce the deficit. We will scrap Labour's un-Employment Act, get Britain drilling again, back Heathrow and cut welfare for those who can work but choose not to. In my first week as Shadow Chancellor, I found the money to increase defence spending to 3 per cent of GDP. John Healey has no excuse.

Labour must stop bending to the will of their left-wing backbenchers and union paymasters and start taking difficult decisions to make our country prosperous again.

ENDS 

Notes to Editors 

Stop maxing out the nation's credit card  

• Over the Parliament, Labour are borrowing £260 billion more than the plan they inherited an extra £3,750 per head. From 2024-25 to 2028-29, Public Sector Net Borrowing is now forecast to be £260 billion higher than forecast in March 2024 (OBR, Economic and Fiscal Outlook, 3 March 2026, link; OBR, Economic and Fiscal Outlook, 6 March 2024, link; £260,000,000 / UK population of 69,500,000 = approx. £3,750). 
• The deficit for this year hit £77.3 billion in August - £8.1 billion above the forecast. (ONS, Public sector finances, 22 September 2026, link; The Guardian, UK borrows £18bn in August, putting pressure on Healey before budget, 22 September 2026, link).
• Public sector net borrowing exceeded £18 billion in August. This was almost £3 billion higher than August last year, and £3.5 billion above the OBR's forecast. (ONS, Public sector finances, 22 September 2026, link; The Guardian, UK borrows £18bn in August, putting pressure on Healey before budget, 22 September 2026, link).
• Britain has higher borrowing costs than all of the PIGS nations (Portugal, Italy, Greece, Spain) (link).

Properly fund defence  

• John Healey said that failing to properly fund the Defence Investment Plan and spend 3 per cent of GDP on defence by 2030 was forcing him to make decisions that would reduce the readiness of our Forces and increase the risk to personnel on operations and could make the country less safe'. HEALEY: As we have regularly discussed, I am certain that a headmark date for 3% of GDP on defence in 2030 is what Britain must set. This commitment would have strong cross-party support. Other European allies are stepping up in this way You know what defence needs. You made the argument for this powerfully in your speech at the Munich Security Conference back in February. Without a DIP that meets the moment in this way, I am being forced to make decisions that would reduce the readiness of our Forces and increase the risk to personnel on operations and could make the country less safe' (John Healey, Letter, 11 June 2026, link). 

Act on the youth jobs emergency

• Youth unemployment has become a crisis. In May to July 2026, 751,000 young people aged 16 to 24 were unemployed. The youth unemployment rate was 16.4 per cent the highest level since 2014 (House of Commons Library, Labour Market Statistics, 15 September 2026, link).
• Will the Chancellor take real action to get people off welfare and into work, such as by cutting the Jobs Tax for under 25s, as the Conservatives pledged to at their Conference this week?

No new taxes 

• Labour have increased the tax burden by £66 billion, or £2,275 per household, taking the tax burden to a historic high. At Autumn Budget 2024, Rachel Reeves increased taxes by £40 billion before increasing them by £26 billion at her second Budget. With 29 million households in the UK, this is equivalent to £2,275 per household (The Labour Party, Change, 13 June 2024, link; OBR, Economic and Fiscal Outlook, 26 November 2025, link; ONS, Families and households in the UK: 2025, 17 April 2026, link). 
• The tax burden is set to reach a historic high of 38.5 per cent of GDP, eroding hardworking people's payslips and punishing businesses. Labour's first two Budgets have increased taxes by £36 billion and £26 billion respectively, pushing the tax burden to a historic high of 38.5 per cent of GDP (OBR, Economic and Fiscal Outlook, 3 March 2026, link). 
• Over the Parliament, Labour are already taxing £240 billion more than the plan they inherited. From 2024-25 to 2028-29, National Accounts Taxes are now forecast to be £238.2 billion higher than forecast in March 2024 (OBR, Economic and Fiscal Outlook, 3 March 2026, link; OBR, Economic and Fiscal Outlook, 6 March 2024, link). 

Cut welfare and get people into work 

• Spending on working-age benefits is forecast to be £170.1 billion by the end of the Parliament  £32 billion higher. Welfare spending on working-age benefits (as measured by the share of social security within the Welfare Cap) in 2024-25 was £137.6 billion; it is forecast to increase to £170.1 billion by 2028-29, the end of the Parliament (DWP, Benefit expenditure and caseload tables 2026: Outturn and forecast tables: Spring Forecast 2026, 14 April 2026, link). 
• The Welfare Secretary, Pat McFadden, said that every meeting I have is who can we tax to pay benefits to others'. The Mandelson Files show Pat McFadden's real views; he said: Every meeting I have is who can we tax to pay benefits to others. They're asking the wrong questions' (CO, Humble Address Documents Volume II Part III, p. 243, 1 June 2026, link). 

Warnings ahead of the Budget 

• The Governor of the Bank of England has warned that fiscal policy must be credible. Speaking about governments around the world, Andrew Bailey said: Whatever the stance of fiscal policy is, it must be credible and directed at stability' (Andrew Bailey, Speech at the Istanbul Economic Forum, 8 October 2026, link). 
• Andy Haldane has said the Government is on thin ice' over tax rises at the Budget. (The Times, UK on thin ice' over budget tax rises, Andy Burnham warned, 6 October 2026, link).
• Jim O'Neill has warned Burnham aganst raising taxes. (Financial Times, Drop in fiscal headroom better option than Budget tax rises, says Jim O'Neill, 9^th October 2026, link).
• EY has warned that the Chancellor's headroom has more than halved since March. EY estimates that headroom has fallen from £23.6 billion to around £11 billion as higher energy prices and gilt yields bite and said: Taxes are already forecast to reach record highs as a share of GDP' (EY, UK Pre-Budget Fiscal Outlook, 5 October 2026, link).