John Healey will set out his first budget as chancellor on 28 October, with the government’s manifesto promise not to increase the “big three” — income tax, national insurance and VAT — shaping the political and fiscal debate. That restriction narrows some options but leaves a range of other tax measures and fiscal choices that could still materially affect households, businesses and public spending.
Manifesto limits and political context
Labour’s pledge not to increase the principal direct and indirect taxes places a clear political constraint on the chancellor. That promise is likely to steer attention away from headline rate rises and towards subtler changes such as adjustments to thresholds, freezes on allowances, or targeted measures aimed at raising revenue without breaching the manifesto commitment. How the government balances those choices will be watched closely by opposition parties, business groups and voters.
What ministers can and cannot change
With rates on income tax, national insurance and VAT off the table, other areas become more significant. The government can alter tax thresholds and the value of personal allowances, which effectively raises or lowers tax burdens without changing statutory rates. It can also tweak VAT exemptions, duties on alcohol, tobacco and fuel, business levies, capital gains tax arrangements, and reliefs for pensions or investment. Any such moves would be framed as technical or targeted but could still have widespread effects.
Implications for households and businesses
Freeze or uprating decisions for thresholds and allowances are often felt across the population: freezing a personal allowance or the point at which higher rates apply can push more people into higher tax bands over time. For firms, changes to business taxes, capital allowances or investment incentives would influence investment decisions and hiring. The chancellor’s choices on tax reliefs and compliance measures will therefore be analysed for their distributional impact and effect on economic growth.
Revenue, spending and enforcement
Beyond headline rates, governments can seek revenue through strengthened tax enforcement and measures to tackle avoidance and evasion. Greater investment in HM Revenue & Customs capacity or changes to anti-avoidance rules could boost receipts without altering ordinary taxpayers’ liabilities. At the same time, Healey must consider how any revenue-raising steps will support the government’s spending priorities and borrowing targets amid wider economic pressures.
What to watch next week
Markets, commentators and campaigners will be looking for signals about where the chancellor intends to find fiscal headroom: whether through changes to allowances, targeted levies, business tax measures, or greater emphasis on compliance. With the big three off-limits politically, the budget is likely to focus on these secondary levers and the trade-offs they create between fairness, growth and public services.