The upcoming Budget from Chancellor John Healey has drawn sharp criticism from opposition leader Kemi Badenoch, who warned it could be more damaging to the UK economy than the recent Budgets delivered by former Chancellor Rachel Reeves. Speaking ahead of Healey’s first Budget statement, Badenoch expressed concern that the Government may avoid making significant changes to taxation and spending, which she said are necessary for fiscal sustainability.

Badenoch argued that Labour’s current plans for public spending cuts were unrealistic, describing them as “fictional” and suggesting that an early general election could prevent the Government from implementing these reductions. She noted that Labour had increased spending by more than £100 billion over the past two years and predicted that the party would be reluctant to introduce substantial cuts in the final year before an election.

Her comments follow a recent warning from the Institute for Fiscal Studies (IFS), which stated that Healey’s Budget risks being a “work of fiction” if it does not include clear spending cuts. The IFS indicated that if Healey wishes to increase military spending—a policy area linked to his resignation as defence secretary—while avoiding reductions in other departmental budgets, he would need to offset costs with around £35 billion in additional tax increases or welfare cuts.

Badenoch also highlighted economic challenges such as rising government borrowing costs, which have reached their highest level since 1998. She attributed some of these trends to geopolitical tensions, including conflicts in Ukraine and Iran, but emphasized that the UK’s borrowing costs are higher than those of other major advanced economies in the Group of Seven (G7). She criticized what she described as Labour’s reliance on borrowing to cover interest payments and called for immediate spending reductions, citing that the Conservative Party had identified over £70 billion in potential cuts.

Although specific details of Healey’s Budget remained under wraps ahead of the announcement, reports suggested it would include measures to support low-income households facing rising energy bills this winter and an extension of the fuel duty freeze. Speculation also arose about potential tax changes targeting banks and modifications to capital gains taxation on family business transfers, which could increase the tax burden for retiring entrepreneurs.

In response to Badenoch’s critique, a Labour spokesperson dismissed her economic credibility, referencing her appointment of Andrew Griffith—the architect of the previously criticised mini-Budget—as her Shadow Chancellor. The spokesperson urged the opposition to refrain from lecturing on economic matters.

The Bank of England Governor Andrew Bailey has also stressed the importance of a credible Budget to reassure financial markets amid concerns over public borrowing. Government sources indicated that Healey might reduce the fiscal headroom—an economic buffer against unforeseen events—from approximately £23 billion set during Reeves’ tenure to around £15 billion.

The Budget, scheduled to be delivered shortly, is seen as a critical test of the Government’s ability to manage public finances while addressing rising cost-of-living pressures and geopolitical uncertainties affecting the economy.