---
title: "Healey warns of limited fiscal space compared to New Labour era"
publisher: "Stockmark.IT"
author: "Stockmark.IT Website"
published: "2026-09-29T04:46:29+00:00"
modified: "2026-09-29T04:46:29+00:00"
date: 2026-09-29
canonical: "https://stockmark.it/healey-we-dont-have-as-much-money-as-we-did-under-new-labour/"
category: "Financial"
categories: ["Financial", "Government"]
image: "https://i0.wp.com/stockmark.it/wp-content/uploads/2026/09/healey-warns-of-limited-fiscal-space-compared-to-new-labour.png?fit=1536%2C1024&quality=80&ssl=1"
format: "news"
language: "en-GB"
---

# Healey warns of limited fiscal space compared to New Labour era

**Published:** September 29, 2026
**Author:** Stockmark.IT Website
**Categories:** Financial, Government
**Featured image:** ![Healey warns of limited fiscal space compared to New Labour era](https://i0.wp.com/stockmark.it/wp-content/uploads/2026/09/healey-warns-of-limited-fiscal-space-compared-to-new-labour.png?fit=1536%2C1024&quality=80&ssl=1)

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Chancellor John Healey has cautioned Labour members that the current government lacks the financial flexibility enjoyed by the party during the late 1990s and early 2000s. In an address to party activists, the Chancellor argued that the economic conditions of the New Labour era, characterised by higher growth rates and lower debt levels, are no longer present. He attributed the current fiscal constraints to what he described as reckless decisions made by the Conservative government. Healey stated that the surplus funds available to New Labour in the nineties are simply not there now, noting that economic growth under Gordon Brown was more than double the rate seen in the subsequent Tory years. He emphasised that Britain faces a more difficult economic environment today, with debt payments rising to exceed the combined budgets for defence and justice. The Chancellor stressed that the cost of national debt is not merely a statistical figure but represents money that cannot be allocated to essential services such as the NHS, schools, housing, and social care. He reaffirmed his commitment to fiscal discipline, describing it as the foundation for every promise the government makes.

Market reactions have reflected growing concerns over the government’s borrowing costs. Gilt yields edged up on Monday morning amid fears of higher inflation and potential interest rate hikes. This increase in borrowing costs occurs at a critical time when judgments are being made on debt interest payment projections. The government is projected to spend approximately 110 billion pounds on debt interest payments this year. Economists are currently revising their fiscal headroom projections based on changes to growth forecasts and market movements. The Resolution Foundation, a left-leaning think tank, suggests that the fiscal buffer could fall to as low as around 5 billion pounds. This estimate factors in public sector pay increases. Additionally, reports in The Times indicate that a downgrade on migration forecasts could cost the government billions of pounds. During the Labour Party’s Business Day on Monday, lobbyists and business leaders sought clarity on whether tax increases were imminent. One industry figure in Liverpool told City AM that Treasury officials have indicated there will be less focus on the City than under Rachel Reeves, with relations described as returning to a norm under Healey. This official was noted as being unusually interested in the financial services sector compared to predecessors. A City source suggested that Lucy Rigby is a champion for financial and professional services, keeping engagement lines open. However, concerns remain that the Prime Minister has prioritised trade union and small business interests over larger corporations and wealthy individuals.

Business leaders have reacted sharply to the Chancellor’s remarks. Shevaun Haviland, chief executive of the British Chambers of Commerce, warned that tax hikes would destroy growth, describing such measures as killing the golden goose. She noted that businesses have been forced to find efficiencies after Reeves targeted employers with a 25 billion pound tax hike, while the government failed to deliver on its own reforms to public expenditure. Haviland stated that the government still needs to win back business confidence. Healey’s room for manoeuvre regarding spending cuts is limited, with savings and public sector productivity boosts pencilled in by Reeves already described as ambitious. Welfare reforms are not expected until after the Budget is delivered. However, Healey focused on changes to disability payments and youth unemployment in his speech. He also announced a new fund for workplace training to be delivered by unions, which received rapturous applause from Labour members and union officials. Shadow chancellor Andrew Griffith MP criticised the speech, arguing that Healey failed to address the out-of-control welfare bill, increase defence spending to three per cent of GDP, scrap Labour’s fuel duty hike, or present a credible plan to grow the economy and employ young people. Griffith suggested that Healey dedicated more time to praising Rachel Reeves than to outlining concrete economic strategies.

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