UK Chancellor Healey Pledges Fiscal Buffer in Pitch to City

b]jr70i54e8fkc8ok6frk3)u_media_dl_1.png Office for Budget Responsibility

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(Bloomberg) — Chancellor of the Exchequer John Healey committed to disciplined control of Britain’s public finances to protect against economic shocks, as he made a pro-business pitch to the City of London on his third full day in post.

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“The prime minister and I have talked together about how we will work in lockstep to ensure we meet our fiscal rules with a buffer against uncertainty,” Healey told a gathering of executives at Bloomberg’s headquarters in London on Thursday. “Fiscal credibility is the bedrock of stability.”

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Healey, who succeeded Rachel Reeves as Britain’s finance minister after Andy Burnham took over as prime minister on Monday, said he wanted to bear down on costs faced by businesses, including taxes, energy and labor costs. Burnham’s initial policy blitz focused on easing financial pressure for consumers.

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“I know businesses large and small have felt really squeezed,” Healey said. “I’m just as concerned about the cost of business as I am about the cost of living.”

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Burnham’s government announced on Thursday that from April it would cut taxes on pubs, social clubs and some live music venues at a cost of about £100 million ($134 million) annually, the latest in a series of economic measures revealed by the new premier. Other policies announced this week include cutting VAT on electricity bills for households and capping bus fares at £2.

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Burnham has also floated the prospect of increasing the tax-free income tax allowance, though without making any firm commitment. The £12,570 threshold has been frozen for five years, resulting in more people being dragged into paying tax as earnings rise with inflation.

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“We will look at that at the budget,” Burnham told broadcasters on Wednesday. “There is no commitment at this point to change.”

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On Monday, the prime minister said he would use “flexibility” within the UK’s fiscal rules and push borrowing closer to the limits of what investors will tolerate as he seeks to boost Britain’s slow-growing economy. The comments suggested No. 10 is paying attention to calls for the government to use off-balance-sheet structures to fund targeted infrastructure projects.

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“I want government decisions to raise the levels of investment, of innovation, of confidence,” Healey said at Bloomberg on Thursday. “I want Britain to become the best place in the world for those with ideas who want to start and grow a business.”

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—With assistance from Irina Anghel and Selina Chen.

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(Updates with more details from fifth paragraph.)

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