The spectre of Liz Truss’s mini-Budget still haunts the Treasury, but former chancellor Sir Jeremy Hunt has issued a stark warning to his successor: fear of a market revolt must not become an excuse for timidity. With John Healey preparing to deliver his first Budget on October 28, the man who steadied the ship after the 2022 crisis argues that the new Labour administration risks squandering a once-in-a-parliament mandate for radical reform if it settles for merely “getting through the moment.”
The intervention comes as the fiscal arithmetic darkens. KPMG’s latest economic outlook calculates that the fallout from the Iran conflict — specifically the surge in gilt yields — has already erased roughly £9 billion of the Chancellor’s headroom. Sluggish growth and anticipated downgrades from the Office for Budget Responsibility are expected to shave off a further £2 billion. That leaves Healey with a fraction of the £23.6 billion buffer identified at the spring forecast, and “limited room for manoeuvre” by any measure.
The boldness trap
Sir Jeremy’s critique cuts to the heart of Labour’s early strategy. He acknowledges the political trauma of 2022: “The mini-Budget is looming large in every chancellor’s mind since 2022. So that is a given.” But he draws a sharp line between prudence and paralysis. “The temptation will be to just try and do things that get through the moment — a small increase in defence funding, a few cuts, a few small tax rises. And I personally think that’s a real mistake.”
The former chancellor, who was appointed by Rishi Sunak to restore credibility, argues that a first Budget is a unique political window. “This is the moment when you can actually make and win the argument for difficult choices.” He cites three specific tests: replacing the pensions triple lock with an inflation link, committing to 3 per cent of GDP on defence by 2030, and levelling with public sector workers that above-inflation pay rises require productivity gains.
“If they were to say that from the next Parliament we will replace the triple lock with an inflation lock, the markets would look at it and say, ‘Wow, they are serious’,” Hunt said. “The country would look at it and say, ‘Okay, they’re not pretending that we haven’t got big challenges’.”
Welfare: the argument Labour could win
On welfare, Hunt is even more direct. He describes the current system as “totally unsustainable” and “morally completely indefensible for the individuals concerned to park them on benefits rather than help them have a better life.” Crucially, he believes Andy Burnham — whose personal authority within the Labour movement is immense — is the only politician who could carry the party on this terrain.
“Andy Burnham could win that argument with the Labour Party because Labour absolutely love him,” Hunt said. “But at the moment I don’t see any efforts to do that, which I think is a real shame.”
Burnham has so far resisted pressure to cut the welfare bill to fund defence increases, insisting that “national security can’t come at the expense of social security.” That framing may play well with the party base, but it does nothing to close the fiscal gap. The KPMG numbers suggest the Chancellor will have to find money somewhere — and the options are narrowing.
Tax traps and regional fairness
Enter Dale Vince, the clean energy entrepreneur and major Labour donor. He has proposed aligning capital gains tax with income tax rates, ending the Bank of England’s interest payments on commercial bank reserves, and funnelling the proceeds into raising the personal allowance from £12,570 to £15,570. It is a package designed to look progressive on paper.
The Institute for Fiscal Studies is sceptical. Director Helen Miller told the Press Association: “We shouldn’t just think that there’s a simple solution where you put the rate up and all this money arrives at the Treasury.” She points to the need for wider reforms — taxing real rather than inflationary gains, addressing capital flight, and preserving incentives for entrepreneurs.
Hunt goes further. He argues a straight CGT hike would fail “the smell test of being a fair tax increase” because of the vast disparity in regional house prices. “When house prices are 40 to 50 per cent higher in the southeast than they are in Manchester, what you are doing is something fundamentally unprogressive. You’re saying that people should have to pay more tax based not on whether they can afford it, but where they live.”
A Budget that defines a premiership
The Prime Minister’s allies point to a “small but significant poll bounce” as evidence that the government’s cautious start is working. Hunt concedes Burnham has “made quite a good start” but delivers a brutal assessment of the economic vacuum: “No one has any idea about Andy Burnham or John Healey’s economic policy at all. On every big issue, they basically bounce on the head of a needle.”
That vacuum will be filled on October 28. The Chancellor can choose a Budget that manages the headlines for a week — or one that sets the terms of debate for a parliament. The markets, the OBR, and the voters will know the difference.
Why it Matters
The Truss trauma is real, but it cannot become a permanent veto on governing. Britain faces a confluence of pressures — defence, demography, debt service, stagnant productivity — that incrementalism cannot solve. If Healey and Burnham use the mini-Budget as a reason to avoid hard choices, they will not buy safety; they will merely defer the reckoning to a moment when the options are fewer and the political cost far higher. The first Budget of a new government is not a test of nerve. It is a test of purpose.
