The Budget: What will be in it? What might be in it? What can be ruled out?

John Healey will deliver his first Budget as Chancellor on October 28 against the backdrop of a difficult domestic economic situation, made worse due to international market turmoil caused by the Iran war.

Here, the Press Association looks at what can be expected from Mr Healey’s statement, as well as what is widely speculated to be in it.

– ‘Steady as she goes’

In contrast with the wild speculation which has engulfed Westminster ahead of budgets in recent years, what has marked out the period running up to Mr Healey’s first stint in front of the despatch box is a relative lack of information.

The Chancellor is said to have introduced security procedures to the Treasury from the Ministry of Defence, where he served as defence secretary under Sir Keir Starmer, to prevent Budget leaks.

What information has emerged in the weeks ahead of the fiscal event in newspapers suggests Mr Healey will not be using the Budget to make radical changes to the Government’s tax and spend plans, with the Times billing it as a “steady as she goes” Budget.

– Headroom and borrowing costs

Mr Healey is likely to have a reduced fiscal headroom at this year’s Budget because of the increased cost of Government borrowing resulting from the Iran war.

Fiscal headroom is the buffer the Government has above its self-imposed spending rules.

The two main fiscal rules are that Government spending should be balanced or heading towards a surplus by 2029/30, rather than in deficit; and that public debt should fall as a share of the economy in the same year.

Former chancellor Rachel Reeves raised taxes at last year’s budget to double the headroom to £22 billion.

The narrower headroom could dampen the confidence of lenders and investors in the UK, and would also reduce the Government’s ability to absorb a sudden economic shock in the event of another international crisis.

– Spending pressures

But the widely-respected Institute for Fiscal Studies think tank has said the Chancellor should be more worried about spending pressures than the fiscal headroom.

The same inflation that is narrowing headroom is eroding the value of individual Government departments’ cash budgets.

This means they will effectively have to meet commitments to pay their workers and provide services with less money, unless the Chancellor increases their budgets.

Paying for those increased budgets would however require him to find the money from somewhere else: tax rises or spending cuts.

– ‘Breathing space’ for households and businesses

The Chancellor will use the Budget to lay out how the Government plans to account for the commitments made since Andy Burnham came to power which are aimed at helping people and businesses with the increased costs of living and trading.

These include the promise to cut VAT on energy bills this winter, and to slash business rates for pubs, clubs and live music venues.

Mr Healey and the Prime Minister have both spoken about how they want to give the public and businesses “breathing space” at the Budget, hinting that further financial help could be doled out.

– Slashing red tape

A further measure to support business set to be detailed in the Budget is Mr Healey’s plan to cut back on “form-filling and pointless paperwork”.

The Treasury estimates that paring back the regulatory admin businesses are required to do could save small concerns up to £800 million worth of red tape.

Mr Healey plans to streamline business reporting requirements, and cut bureaucracy around the chain of buying and selling homes.

– Capital gains tax rise ruled out

The Chancellor has rejected the possibility of hiking capital gains tax, the levy on profits from selling assets, at the Budget.

Prominent Labour voices have argued for the tax to be raised over the summer, including now Defence Secretary Wes Streeting, and Louise Haigh, the First Secretary of State.

But Mr Healey has ruled out the move after warnings it could end up costing the Government money than it is worth if wealthy people leave the country or defer selling off assets.

– Bank tax under consideration

Mr Healey does however appear to be weighing up the possibility of raising a tax on the profits of banks.

The Chancellor is reportedly considering increasing the surcharge on bank profits from 3% to 8%, reversing a tax cut for the sector launched by former chancellor Jeremy Hunt.

The Trades Union Congress, a supporter of the move, said the hike on the “bumper profits” of banks would raise £2.25 billion a year.

But City representatives have claimed the move will stifle investment in Britain.

– £4.7bn defence black hole

The Chancellor has promised to fill a £4.7 billion black hole in Britain’s defence investment plan (Dip).

The Dip, one of Sir Keir’s final major announcements as prime minister, promised an extra £15 billion of funding for the UK defence sector.

The extra cash means Government spending on defence will rise to 2.7% of GDP by 2027.

While £10.3 billion of the extra money has been funded, some £4.7 billion remains outstanding for Mr Healey to deal with at the Budget.

He is not expected to lay out plans for further military investment beyond this at the Budget, but will wait until next year to grapple with the issue of increasing defence spending to 3.5% of GDP by 2035, as per Britain’s promise to Nato.

When he resigned as Sir Keir’s defence secretary, Mr Healey suggested it was crucial to reach 3% of GDP on defence by 2030 to put the country on a war footing.