This Budget could be even worse than the two bloodbaths delivered by Reeves, Kemi Badenoch warns

John Healey's maiden Budget risks being even worse than the two delivered by Rachel Reeves, Kemi Badenoch will warn today. 

The Tory leader raises the prospect that the Chancellor will cause more damage to the economy than his predecessor, despite Labour already hiking the tax burden to a post-war high.

In a speech, Mrs Badenoch will say that although he may wish to 'bury his head in the sand' and not make any major changes to taxation and spending, Mr Healey needs to slash expenditure so the Government can live within its means.

And she will brand Labour's current proposals for public spending cuts to balance the books 'fictional', predicting that Andy Burnham will call an early general election before they have to be delivered.

Speaking in London, the Leader of the Opposition is expected to say: 'John Healey is not Rachel Reeves. Many people see that as an improvement. How could it be worse than £70billion 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's did.'

She will say that while the talk in Westminster and Whitehall is of a 'nothing to see here' statement next Wednesday, Britain 'cannot afford to do as little as possible'.

Although the International Monetary Fund (IMF) last week hailed Labour's plan to narrow the Budget deficit – the shortfall between spending and revenue – the Tory leader will say it is based on 'made-up spending cuts'.

'Labour's deficit reduction plans to meet their fiscal rules are predicated on making huge cuts to the public sector in the final year of the spending period. I think there will be an election before then and they'll never have to prove it,' she will say.

 'Labour have increased spending by more than £100billion in just two-and-a-bit years. They are not suddenly going to find some courage to cut spending in the final year of a Parliament right before an election.'

She will highlight a recent warning by the Institute for Fiscal Studies that Mr Healey's Budget risks being a 'work of fiction' unless he spells out spending cuts.

The think-tank said that if the Chancellor wants to increase military spending – the issue which saw him quit as Sir Keir Starmer's defence secretary – and avoid squeezing departmental budgets, then he must impose tax rises or welfare cuts of £35billion.

Bank of England Governor Andrew Bailey has also said the Budget must be 'credible' to reassure financial markets, after Government borrowing costs reached their highest level since 1998.

Mrs Badenoch will acknowledge that the wars in Ukraine and Iran have pushed up bond yields around the world, but will point out that the UK is paying more to borrow than the other leading economies in the G7.

'We have to stop borrowing so much,' she will say. 'But instead of doing that, Labour are taking out loans to pay the interest on our loans.'

She will urge the Government to bring spending down, pointing out her party has identified more than £70billion of cuts that could be implemented straight away. 

It is thought that Mr Healey will try to avoid spooking the markets by leaving about £15billion in fiscal headroom, the buffer against future events, down from the £23billion left by Ms Reeves.

His Budget is expected to include support to help poorer households with soaring energy bills this winter, while the long-standing freeze in fuel duty will be extended.

A tax raid on banks has been predicted, even though the Chancellor described them as a 'jewel in the British economic crown' at an IMF summit in Bangkok last week.

On Monday, it emerged that Mr Healey is also looking at a mechanism used to pass down family businesses.

He may levy income tax on retiring entrepreneurs when they convert their holdings into 'redeemable shares', rather than Capital Gains Tax as at present.

It would mean a business owner paying up to £450,000 on a £1million company, rather than £240,000 under the current system.

However the Budget is not expected to include any new funding for the Prime Minister's plans to tackle the youth unemployment crisis.

A Labour spokesman said of Mrs Badenoch's speech: 'The Conservatives have zero credibility on the economy. After appointing the architect of the economy-crashing mini-Budget [Andrew Griffith] as her Shadow Chancellor, Kemi Badenoch should spare everyone the lecture.'