John Healey’s appointment steadied bond markets on Tuesday, though investors warn the calm may not last once the bills come due.
Britain has a new finance minister, and traders are already asking the same question: how is he going to pay for everything?
New Prime Minister Andy Burnham named John Healey as Chancellor on Monday, a move that eased nerves after a rocky start for UK bonds. Healey, a former defence minister who resigned from Keir Starmer’s government over military spending cuts, brings experience from two junior Treasury roles under Gordon Brown.
Key numbers:
- Defence spending could climb to 3% of GDP by 2030, versus 2.7% under Starmer – an extra £10 billion a year
- The state pension triple-lock costs roughly £13 billion more than cheaper alternatives
- Day-to-day spending ran £42 billion in the red for Q1, £1.3 billion over forecast
- The Iran war could add another £14 billion in unbudgeted costs, per the Resolution Foundation
- That leaves Healey with just £10 billion of room to hit his 2030 fiscal target
Market reaction
Borrowing costs spiked Monday when Burnham hinted at loosening fiscal rules, then eased Tuesday once Healey’s appointment reassured investors. Defence stocks jumped on expectations of higher military spending.
Why it matters
With income tax rate hikes ruled out under Labour’s manifesto pledge, economists expect Healey to reach for capital gains, inheritance, or property taxes instead, alongside more borrowing.
What to watch
Healey’s first budget, expected in autumn, will show how far Burnham’s spending ambitions actually go. Analysts say delaying it risks the same market unease that dogged Starmer’s government.
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Source: Reuters
