Healey urged to be bold on borrowing in first test of Burnham’s growth pledge
Guardian AU Business
•Thu, 06 Aug 2026 06:00:41 GMT
📰 What Happened
Analysis explores how new chancellor John Healey, with just 12 weeks until his first budget, is seeking ways to ramp up public investment without breaking the Treasury's fiscal rules. Economists are urging him to be bold, including exploiting newly flexible fiscal rules or borrowing from markets, to fund priorities such as Andy Burnham's VAT cut on energy bills and to fill a £5bn defence investment funding gap left by predecessor Rachel Reeves.
🔍 The Backstory
Healey, formerly defence secretary, succeeded Rachel Reeves as chancellor after she resigned earlier this year. Reeves bequeathed significant 'headroom' against the rules, about £24bn at her spring forecast, which is unlikely to have been fully eroded by the impact of the Iran war. Healey's boss has made clear he wants a step-change in long-term investment in infrastructure and housing to deliver on a promise of growth.
🎯 Why It Matters
The first budget is a defining test of the government's economic credibility and of chancellor Healey's willingness to borrow for investment. The choices on fiscal rules, taxation and spending will shape infrastructure and housing delivery for years and directly affect the cost of living and public services.
Analysis explores how new chancellor John Healey, with just 12 weeks until his first budget, is seeking ways to ramp up public investment without breaking the Treasury's fiscal rules. Economists are urging him to be bold, including exploiting newly flexible fiscal rules or borrowing from markets, to fund priorities such as Andy Burnham's VAT cut on energy bills and to fill a £5bn defence investment funding gap left by predecessor Rachel Reeves.
Healey, formerly defence secretary, succeeded Rachel Reeves as chancellor after she resigned earlier this year. Reeves bequeathed significant 'headroom' against the rules, about £24bn at her spring forecast, which is unlikely to have been fully eroded by the impact of the Iran war. Healey's boss has made clear he wants a step-change in long-term investment in infrastructure and housing to deliver on a promise of growth.
The first budget is a defining test of the government's economic credibility and of chancellor Healey's willingness to borrow for investment. The choices on fiscal rules, taxation and spending will shape infrastructure and housing delivery for years and directly affect the cost of living and public services.