Healey Prepares First Budget Amid £3 Trillion Debt Surge

British Chancellor John Healey will present the first autumn budget under Prime Minister Andy Burnham’s government on Wednesday at 12.30 GMT.

The announcement comes as the United Kingdom grapples with record debt levels and rising inflation. Total government borrowing surpassed 3 trillion pounds, or $3.99 trillion, in September. This milestone marks the first time the figure has broken that threshold.

The surge in debt is driven by increased spending and higher interest costs. The Office for National Statistics reported that borrowing reached nearly 25 billion pounds in the month of September alone. Much of this increase is attributed to the financial fallout from the Iran war and the closure of the Strait of Hormuz. The government is now spending 100 billion pounds annually just to service this debt.

A central focus of the budget will be funding a major defence overhaul. On Monday, Burnham told ITV’s Good Morning Britain that the government’s top priority is financing its committed defence investment plan. This plan, announced in June, involves 298 billion pounds in investment to move the armed forces toward warfighting readiness. Burnham stated that national security is at the top of the priority list, including meeting NATO commitments to spend 3 percent of GDP on defence by 2030.

Britain currently spends about 2.6 percent of its GDP on defence. The Guardian reported that Healey aims to close a 4.7 billion pound funding gap in the inherited defence plan. This gap is expected to be filled by cutting budgets in other government departments.

The budget is also expected to introduce new taxes on the banking sector and online marketplaces. The Treasury is reportedly considering a change to a 2023 surcharge rate on banks, which could raise about 2 billion pounds. The four largest banks made approximately 15 billion pounds in profit in the first half of this year. Additionally, Healey is looking to tax foreign sellers on platforms like Amazon, Temu, and eBay who avoid paying VAT. This measure is expected to generate up to 1 billion pounds to help fund business rate cuts for high street shops.

For households, the immediate cost of living remains a pressing issue. Energy bills are projected to hit nearly 2,000 pounds per year in January. This represents a 16 percent increase in the government’s price cap, according to a forecast by Cornwall Insight. The rise is linked to global gas and oil prices spiking due to the Middle East conflict. Brent crude futures stood at $115.90 a barrel this week. Reports suggest the chancellor may announce the removal of standing charges for energy supply to help offset these costs.

Helen Miller, director of the Institute for Fiscal Studies, warned that a steady approach to the budget may not be sustainable. She noted that while borrowing is expected to fall in coming years, staying the course with inherited plans could allow inflation to disrupt departmental spending. Jasper Kanter, a research fellow at Aberystwyth Business School, told Al Jazeera that he expects targeted support rather than large-scale tax changes. He highlighted that the government appears focused on addressing specific pressures, such as the cliff edge in carers’ allowance and expanding parental pay.

Some measures have already been confirmed, including the end of the limit on carers’ allowance and the removal of tariffs on items like chocolate and beans. Pensioners are expected to receive a new personal allowance to shield them from income tax. Healey is also expected to add 1 billion pounds to the 39 billion pounds planned for social and affordable housing in England over the next decade. A report on the implementation of the new national care service for the elderly is due in summer 2027.